Amitabh Kant, the Indian Middle Class and their Dream of a Benevolent Autocrat

Dekh tere sansar ki halat kya ho gayi bhagwan,
Kitna badal gaya insaan, kitna badal gaya insaan.

— Kavi Pradeep, C Ramachandra, Kavi Pradeep and IS Johar, in Nastik (1954).

Sometime in late December last year I was part of a panel deliberating on where the Indian economy is headed, at a business school in Mumbai.

Towards the end of the discussion, a fund manager sitting towards my right, offered his final reason on why the so-called India growth story was faltering. He said, India has too much democracy.

The room was full of MBA students, just the kind of audience which laps up reasons like the one offered by the fund manager. As soon as he finished speaking, I explained to the audience why the fund manager was wrong, not just because India and the world need democracy, but also from the point of view of economic growth.

Of course, that wasn’t the first time I had heard the too much democracy argument being made in the context of it holding back India’s economic growth. Over the years, I have seen, friends, family members, random acquaintances and men and women I don’t know, make this argument with panache and great confidence.

It seemed, as if, in their minds, they had a picture of this great leader who would come on a white horse, brandishing his sword, and set everything right. They wanted India to be governed by a benevolent autocrat. 

Given this, it is hardly surprising that Amitabh Kant, the CEO of the NITI Aayog, and one of central government’s top bureaucrats, said yesterday (December 8, 2020): “Tough reforms are very difficult in the Indian context, we are too much of a democracy.”

The thinking here is that given that India is a democracy, decision making takes time and effort and you can’t just push through economic reforms which can lead to economic growth. Getting things done needs a collaborative effort and hence, is deemed to be difficult. Hence, it would be great to have less democracy, making it easier for a strong leader to push economic reforms through.

Of course, the mainstream media has largely ignored Kant’s comment. But this is an important issue and needs to be discussed.

The question is where does the thinking of too much democracy come from.

Some of it is remnant from the emergency era of 1975-1977, when trains used to apparently run on time. Trains not running on time was basically a manifestation of the general frustration of dealing with the so-called Indian system.

The logic being that, with the then prime minister Indira Gandhi keeping democracy on a backseat, it essentially ensured that the system (represented by trains) actually worked well (represented by trains running on time).

In the recent years, too much democracy hurting India’s future economic prospects comes from the economic success of China. China doesn’t have democracy. The Chinese Communist Party governs the country. In fact, there is no difference between the Party and the government.

This essentially has ensured they can push economic growth without any resistance from the opposition, different sections of the society or the citizens themselves for that matter.

China is not the only example of this phenomenon. Countries like South Korea under Park Chung-hee, Taiwan under Chiang Kai-shek and Singapore under Lee Kuan Yew, made rapid economic surges under leaders who can be categorised as benevolent autocrats.

As economist Vijay Joshi said at the 15th LK Jha memorial lecture at the Reserve Bank of India, Mumbai, in December 2017:

“ Fewer than half-a-dozen of the 200-odd countries in the world have achieved super-fast and inclusive growth for two or more decades on the run, and almost all of them were autocracies during their rapid sprints.”

So, history tells us that most super-fast growing countries at different points of time have been autocracies.

Beyond this, there is the so-called India growth story which also leads to the sort of thinking which concludes that too much democracy hurts economic growth. Ravinder Kaur makes this point beautifully in Brand New Nation—Capitalist Dreams and Nationalist Designs in Twenty-First-Century India.

As she writes:

“What is dubbed a growth story in policy-business circles is essentially an enchanting fairy-tale blueprint of economic reforms along with calls of a strong political leader to implement it… After all, capital has always rooted for strong, decisive leaders and centralized governance that can ensure its swift mobility and put the nation’s resources at the disposal of investors.”

A good part of India’s corporate and non-corporate middle class buys into this kind of thinking. They look at themselves as investor-citizens.

This leads to the firm belief that autocracies lead to faster economic growth. Hence, too much democracy is bad for economic growth. Only if India had a stronger leader. QED. Or so goes the thinking.

Dear Reader, this is nothing but very lazy thinking. While, most super-fast growing countries may have been autocracies with a benevolent autocrat at the top, the real question is, are all autocracies with a benevolent autocrat at the top, or at least most of them, super-fast growing countries.

Economist William Easterly makes this point in a research paper titled Benevolent Autocrats. As he writes: “The probability that you are an autocrat IF you are a growth success is 90 percent. This probability seems to influence the discussion in favour of autocrats.”

But that is the wrong question to ask. The question that needs to be asked should be exactly opposite—if a country is governed by an autocrat what are the chances that it will be a growth success? Or as Easterly puts it: “The relevant probability is whether you are a growth success IF you are an autocrat, which is only 10 percent.”

And this is where things get interesting, if we choose to look at data. Ruchir Sharma offers this data in his book The Ten Rules of Successful Nations. Let’s look at this pointwise.

1) In the last three decades, there were 124 cases of a country growing at faster than 5% for a period of ten years. Of these, 64 growth spells came under a democratic regime and 60 under an authoritarian one. Clearly, when it comes to countries growing at a reasonable rate of growth for a period of ten years, democracies do well as well as authoritarian regimes.

2) Let’s up the cut off to an economic growth of 7% or more for a period of ten years. How does the data look in this case? Sharma looked at data of 150 countries going back to 1950. He found 43 cases where a country’s economy grew at an average rate of 7% or more for a period of ten years. Interestingly, 35 of these cases came under authoritarian governments. As mentioned earlier, super-fast growth and autocrats go together. But this just shows one side of things.

3) So, what’s the other side? While super-fast growth in a bulk of cases has happened under authoritarian regimes, so have long economic slumps or economic slowdowns.

As Sharma writes:

“Long slumps are also much more common under authoritarian rule. Since 1950, there have been 138 cases in which, over the course of a full decade, a nation posted an average annual growth rate of less than 3 percent—which feels like a recession in emerging countries. And 100 of those cases unfolded under authoritarian regimes, ranging from Ghana in the 1950s and ’60s to Saudi Arabia and Romania in the 1980s, and Nigeria in the 1990s. The critical flaw of autocracies is this tendency toward extreme, volatile outcomes.”

Also, under authoritarian regimes, economic growth can see wild swings.

So, for every China there is a Zimbabwe as well, which people forget to talk or think about. For every Singapore, there are scores of African dictators who killed thousands of people during their rule and destroyed their respective economies. Hence, while autocracies may lead to super-fast growth, they can also lead to long-term economic stagnation and huge political turmoil.

Also, evidence is clear that steady growth happens best in democracies.

As Sharma writes:

“Together, Sweden, France, Belgium, and Norway have posted only one year of growth faster than 7 percent since 1950. But over that time, these four democracies have all seen their average incomes increase five- to sixfold, to a minimum of more than $30,000, in part because they rarely suffered full years of negative growth.”

Further, if you look at the list of countries with a per-capita income of more than $10,000, all of them are democracies. China, as and when it reaches there, will be the first autocracy, which will make it an exception. An exception, which proves the rule. That is, in the  medium to long-term, democracy and economic growth go hand in hand.

At least, that’s what history and data tell us. But don’t let that come in your way of believing the good story of authoritarian regimes run by benevolent autocrats leading to fast economic growth all the time.

It must be true if you believe in it. I mean, Mr Kant surely does. And so do a whole host of middle class Indian men and women.

Why there can be no internal democracy in the Congress party

rahul gandhiVivek Kaul 
Rahul Gandhi wants to create a new Congress. “We will give you a party you will be proud of, and that has your voice embedded inside,” he said, after the Congress party was routed in the recent state elections.
Congress is no longer a party with the voice of people embedded in it because it has had no internal organisational elections for four decades now. 
As Ashutosh Varshney wrote in a recent colum in The Indian Express “Internal elections in the Congress party began in 1920 under Mahatma Gandhi’s stewardship and lasted till 1973, when Indira Gandhi suspended them.”
Indira Gandhi as we all know turned Congress into a family run business.
Varshney feels that if the Congress party has to have any long term future, it should start having internal elections again, even if it means that the Gandhi dynasty is ousted from the top rungs of the party.
The logic is if the party can revive internal democracy only then can it be in a position of choosing candidates who are likely to win elections. A candidate who has the support of the party members is also more likely to have the support of the people at large.
There are various reasons why this will not work. The foremost being that the party hasn’t had internal elections for four decades now and in the process has become a party of sycophants. It is a party of the 
chamchas, by the chamchas and for the chamchas. These chamchas start right at the top. The first level of chamchas report directly to the Gandhi family. The second level of chamchas reports to the first level of chamchas. The third level of chamchas reports to the second level of chamchas and so on. This is how the hierarchy works. Any attempts to break this hierarchy by encouraging true internal democarcy would mean that the party will stop functioning totally. And that can’t possibly be a good outcome.
The top two posts of the Congress party are held by the Gandhi family (i.e. Rahul and his mother Sonia). And that being the case, how can any Congress party member be expected to take the idea of internal democracy seriously?
Shekhar Gupta in a column in The Indian Express suggests that internal democracy can only happen by holding real elections for the posts of the party president and vice president. The question is will any real Congress member worth his salt decide to challenge Sonia and Rahul? Even if someone decides to do that what will be his chances of winning? And once he loses the elections, how safe will be his future within the party?
The culture of the party the way it has evolved has become such that it cannot think beyond the Gandhi family. When Indira Gandhi was assassinated in 1984, the party immediately looked up to Rajiv Gandhi, Indira’s son, to take over the party. When Rajiv Gandhi was assassinated in 1991, the party immediately went to Sonia, Rajiv’s wife, to take over the party. Rajiv accepted the post, Sonia did not.
In fact, it is very well known that Sonia did not like the idea of her husband entering full time politics after the death of his brother Sanjay in June 1980. Rasheed Kidwai’s 
24 Akbar Road – A Short History of the People Behind the Fall and Rise of the Congress has a small anecdote which proves the same. “’He(i.e. Rajiv) says his wife will divorce him if he joins politics,’ Indira Gandhi told writer Khushwant Singh, when he asked her if her son Rajiv would fill the gap left by his brother Sanjay.” Rajiv eventually did join the party in 1981. He contested and won the Amethi Lok Sabha seat on August 17, 1981 and was made the General Secretary of the party on February 3, 1983. He was elevated to the top post after his mother’s assassination on October 31, 1984.
But Sonia did not join the party after Rajiv’s assassination in May 1991. Even though she stayed away from full time politics in the years that followed, she was never really completely out of it. As Rasheed Kidwai writes in 
Sonia – A Biography “There is general consensus that she encouraged all those who were opposed to Rao (PV Narsimha Rao, who was the prime minister between 1991 and 1996). Throughout the Narsimha Rao regime, 10 Janpath(where Sonia continues to stay) served as an alternative power centre or listening post against him.”
In December 1997, Sonia Gandhi indicated that she wanted to play a more active role in Congress politics. It took the party less than three months to throw out Sitaram Kesri, the then President of the party and put Sonia in charge in his place. In fact, the manner in which it was done was quite dubious.
The point is that the Congress cannot really see itself beyond the Gandhis. Also, the bigger question is will the Gandhis ever not want to be at the top of their family run concern? If that was the case Sonia Gandhi would have never entered full time politics and neither would have Rahul.
In the recent past, elections have been held in the Youth Congress. This has been the brainchild of Rahul Gandhi and his team to encourage internal democracy within the party. They have used former election commission officials to manage these elections. But the results clearly prove the point that I had made earlier. The Congress is a party of the 
chamchas, by the chamchas and for the chamchas.
Aarthi Ramachandran in Decoding Rahul Gandhi gives examples of chamchas winning these elections in several states. As she writes “In Chhattisgarh Rahul Gandhi’s team member Jitendra Singh spoke to Congress strongman Ajit Jogi’s son Amit to dissuade him from contesting the elections…Though ‘Team Rahul’ managed to stop Amit from contesting it could do nothing about the post being won by his supporter, Uttam Kumar Vasudeo. In Jharkhand, Manas Sinha, a youth leader who had the support of…Subodh Kant Sahay (then a cabinet minister), became the president. Priyavrat Singh, a supporter of former chief minister Digvijay Singh was elected in Madhya Pradesh.”
This was repeated in almost every state throughout the country. A major reason for the same is the fact that it takes a lot of money to fight these internal elections in the Youth Congress. As Ramachandran writes “Only those who have a corpus of about Rs 5-10 lakh can aspire to win the Assembly level Youth Congress elections, one IYC(Indian Youth Congress) office-bearer from Bihar, who did not want to be named, said.”
At a higher levels the money can be a lot more. “The money required to fight IYC elections at higher level varies according to the socio-economic profile of states. The amount of money spent in states such as Bihar is still modest compared to the Rs 2 crore spent in Tamil Nadu for the position of the Lok Sabha Youth Congress president’s post, according to the figures of a party insider,” writes Ramachandran. Hence, it is not surprising that 
chamchas of the bigger chamchas in the party are winning these elections, given that so much money is needed to fight these elections.
Also, a party which has followed a certain way of operating for four decades cannot change overnight. It is worth asking here does the party really attract people who believe in the idea of internal democracy? Or does it just attract people who are looking to latch onto a reasonably senior 
And during the time it tries to change itself, it is not as if other political parties will be sitting around doing nothing. As Gupta writes in The Indian Express “If a rapidly declining, even self-destructive, political party wishes to rebrand, reposition and rejuvenate, will it be done through a 10-year project to democratise it from bottom up? By that time, the BJP would have taken away your mantle of being India’s largest political party and the Aam Aadmi Party would have stolen your Muslim vote-banks pretty much the way it took away Delhi’s urban poor.”
Given this, all this talk about rejuvenating internal democracy in the Congress party, should at best be taken with a pinch of salt.
The article originally appeared on on December 16, 2013 

(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Is Rahul Gandhi a hit and run politician?

rahul gandhi
Vivek Kaul 
Rahul Gandhi is angry again. Yesterday, he barged into a press conference being addressed by Congress general secretary Ajay Maken and announced that the ordinance passed by the Union Cabinet to protect convicted legislators from complete disqualification as “complete nonsense”.
The Supreme Court had ruled on July 10, that an MP or an MLA, if convicted by a court in a criminal offence with a jail sentence of two years or more, would be immediately disqualified. On September 24, the Union Cabinet cleared the the Representation of the People (Amendment and Validation) Ordinance, 2013 to negate the Supreme Court ruling.
This ordinance allows convicted MPs and MLAs to continue in office to the condition that their appeal is admitted by a higher court within a period of 90 days and their conviction is stayed.
Rahul Gandhi felt that this was incorrect and said “I’ll tell you what my opinion on the ordinance is. It’s complete nonsense. It should be torn up and thrown away. That is my personal opinion.”
“I am interested in what the Congress is doing and what our government is doing. That is why what our government has done as far as this ordinance is concerned is wrong,” he went on to add, embarrassing the Prime Minister and his cabinet of ministers, which had cleared the ordinance only a few days back, in the process.
A lot of analysis has happened since yesterday afternoon, when the Gandhi family scion said what he did. Some people have suggested that “Rahul has his heart in the right place”. Some others have said “what is wrong with calling rubbish, rubbish”. A television anchor known for his loud and aggressive ways called it the “victory of the people”. And still some others have asked the obvious question “how could the government have cleared the ordinance without the consent of Rahul or his mother Sonia Gandhi?”
On the whole, Rahul’s decision to call the ordinance “nonsense” and something that should be “torn and thrown away” is being projected as a surprise. While nobody could have predicted what Rahul Gandhi did yesterday, at the same time this can’t be termed as a surprise.
Rahul Gandhi over the last few years has made a habit of raking up issues to embarrass the government and his party, by saying something controversial and then disappearing. In July 2008, Rahul visited the house of Kalavati Bandurkar, in the village Jalka in the Vidarbha region of Maharashtra. Her husband had committed suicide in December 2005, hit by crop failure and debt. He left her with a debt of Rs 1 lakh. After visiting her, Rahul highlighted her plight in Parliament and then quickly forgot about her. It was an embarrassment for the Congress Party given that it ruled the state of Maharashtra. Since bringing her into the limelight, 
Kalavati’s daughter and a son in law have also committed suicide.
In October 2008, while addressing girl students at a resort near Jim Corbett National Park, Rahul Gandhi referred to “politics” as a closed system in India. “If I had not come from my family, I wouldn’t be here. You can enter the system either through family or friends or money. Without family, friends or money, you cannot enter the system. My father was in politics. My grandmother and great grandfather were in politics. So, it was easy for me to enter politics. This is a problem. I am a symptom of this problem. I want to change it.,” he said. Where is the change? When was the last time the Congress party had an election for the post of its president? If the top post of the party is not democratic, how can the party be expected to be democratic?
On February 5, 2010, Rahul came to Mumbai and travelled in a local train both on the western line (From Andheri to Dadar) and the central line (from Dadar to Ghatkopar). A lot of song and dance was made about him defying the Shiv Sena, but nothing constructive came out of it. The local trains continue to burst to the seems.
On May 11, 2011, Rahul riding pillion on a bike managed to enter the Bhatta-Parsaul villages in Uttar Pradesh, giving the district administration a slip, and challenging the might of Mayawati, the then Chief Minister of Uttar Pradesh.
The villagers in Bhatta-Parsaul were protesting against the acquisition of land by the state government and the protests had turned violent. A few days later Rahul went to meet the Prime Minister Manmohan Singh to appraise him of the situation.
After coming out of the meeting he told reporters “The issue here is a more fundamental one with regard to these villages in particular and a large number of villages in UP down the Agra highway, where state repression is being used, where people are being murdered…quite severe atrocities are taking place there….There is a set of 74 (mounds of) ashes there with dead bodies inside. Everybody in the village knows it. We can give you pictures. Women have been raped, people have been thrashed. Houses have been destroyed.” These were serious allegations, but nothing ever came out of them.
On August 26, 2011, Rahul 
gave a speech in favour of Lok Pal in the Lok Sabha, where he said “why not elevate the debate and fortify the Lok Pal by making it a Constitutional body accountable to Parliament like the Election Commission of India?” That was the last we heard of Lok Pal. Meanwhile, Anna Hazare, continues to threaten to go on another hunger strike if the bill is not passed by the Parliament soon.
More recently, on April 4, 2013, Rahul addressed the Confederation of Indian Industries. It was a 75 minute speech, and one of the things he recounted about was about a journey he made a few years back on the Lokmanya Tilak express from Gorakhpur to Mumbai (Lokmanya Tilak is a station in Mumbai at which many long distance trains coming from the Eastern part of the country terminate). “I spent a large part of the Thirty Six hour journey moving across the train and talking to travellers – youngsters, weary families, and migrants moving from the dust of Gorakhpur to the glitter of Mumbai. Took us Thirty Six hours. It is called an Express!”
Some time later in the speech he said: “I am a pilot. I learnt to fly in the United States, I came back. I wanted to convert my license. So I went to the DGCA and I asked what do I have to do. They gave me the curriculum, I opened the book. A large section in the book talks about how to drop mail from aero-planes. How many of you are getting your mail dropped from airplanes in the sky?…And it’s not only in pilot training, it’s everywhere. Look at our text books, open them out. Most of the stuff is not really relevant to what they are going to do.”
The things that Rahul said were not only an embarrassment for the current government. The fact that Indian Railways takes so much time or our education system is not up to the mark, has not happened overnight. The degeneration has happened over a period of time, meaning Rahul’s great-grandfather(Jawahar Lal Nehru), his grandmother (Indira Gandhi), his uncle (Sanjay Gandhi), his father(Rajiv Gandhi) and his mother(Sonia Gandhi), who have been de-facto heads of government at various points of time since India’s independence, are responsible for it.
But then we all know that? How does just pointing out the obvious help anybody? Where are the solutions? As 
The Economist wrote after Rahul’s CII speech “Gandhi could have spelled out two or three specific measures, ideally in some detail, that he would support—for example, getting an Indian-wide goods-and-services tax accepted; promoting investment in retail or other industries; or devising a means by which infrastructure could be built much quicker. If he were really brave, he might have set out thoughts on ending bureaucratic uncertainty over corruption, or on land reform.”
But all Rahul seems to do is hit and run. He says something on an issue, embarrasses his party, his government or his ancestors and moves on. Rahul Gandhi is not a serious politician. He is in politics because he cannot do anything else or is expected to continue the family tradition and keep the flag flying.
One can only speculate on the reasons for his lack of interest, given his reclusive nature. From his father and grandmother being assassinated to the fact that the future generations are no longer interested in what their forefathers built, be it business or politics.
I am more tempted to go with the latter reason. Rasheed Kidwai, makes this point in the new edition of his book 
24 Akbar Road. As he writes “It is said that the conqueror Taimur the ‘Lame’ once spoke to the famous historian and sociologist Ibn Khuldun about the fate of dynasties. Khuldun said that the glory of a dynasty seldom lasted beyond four generations. The first generation inclined towards conquest; the second towards administration; the third, freed of the necessity to conquer or administer, was left with the pleasurable task of spending the wealth of its ancestors on cultural pursuits. Consequently, by the fourth generation, a dynasty had usually spent its wealth as well as human energy. Hence, the downfall of each dynasty is embedded in the very process of its rise. According to Khuldun, it was a natural phenomenon and could not be avoided.”
Hence, evolution is at work. As historian and author Ramachandra Guha told me 
in an interview I did for Firstpost in December 2012 “I think this dynasty is now on its last legs. Its charisma is fading with every generation. And Rahul Gandhi is completely mediocre.”
That to a large extent explains Rahul’s hit and run mentality and his reluctance to take a more active role in government. After his yesterday’s statement, the least that Rahul Gandhi can do is take on more responsibility either by advancing the Lok Sabha elections or becoming a part of the government in some form.
But neither of these things is going to happen because Rahul Gandhi has said what he wanted to and disappeared again. His attitude is best reflected in an interview he gave to the 
Tehalka magazine in September 2005, in which he is supposed to have remarked “I could have been prime minister at the age of twenty-five if I wanted to.”
The statement created an uproar. The Congress party immediately jumped to the defence of its princling. Abhishek Manu Singhvi, specifically mentioned that Rahul had not said ‘I could have been prime minister at the age of twenty-five if I wanted to’.

(Tehakla initially stood by its story but backed down later. “This seems to be a clear case of misunderstanding. Mr Gandhi thought he was having a casual chat whereas our reporter took it to be a proper interview,” the weekly said in a statement(The ‘edited’ casual chatcan still be read on Tehelka’s website)).
The article originally appeared on on September 28, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 

Needed: A new poverty line which shows 67% of the country is poor

Vivek Kaul
The Congress party after claiming that its social policies over the last nine years had helped bring down poverty in the country, now seems to have done a volte face.
Data released by the Planning Commission on July 22, 2013, suggested that poverty in India had declined from 37.2% in 2004-05 to 21.9% by 2011-12. Several spokespersons of the Congress party led United Progressive Alliance(UPA) were quick to claim credit, and attributed this to several social sector programmes that the party had launched during its tenure.
A poverty line separates the poor section of the population from the non poor section. Those below the poverty line are deemed to be poor and those who are above it are deemed to be not poor. And what exactly is a poverty line? As S Subramanian writes in The Poverty Line “A poverty line is identified in monetary units as the level of income or consumption expenditure required in order to avoid poverty.”
The consumption expenditure in order to avoid poverty is set at Rs 816 per person per month in the rural areas and Rs 1000 per person per month in the urban areas. For a family of five people, this amounts to Rs 4,080 per month in rural areas and Rs 5000 per month in urban areas.
These numbers were set by the report of the expert group to review methodology for estimation of poverty. The report was released in November 2009 (It is better known as the Tendulkar committee report).
The committee arrived at that numbers taking into account the expenditure on food,
clothing, footwear, durables, education and health.Actual private expenditures reported by households near the new poverty lines on these items were found to be adequate at the all‐India level in both the rural and the urban areas and for most of the states,” the report said.
Interestingly, the Tendulkar committee poverty line was an improvement on the earlier poverty line which only took into account the expenditure
required to consume an identified number of food calories. For rural India this number was 2,400 calories. For urban India this number was at 2,100 calories. Anyone consuming less than this was deemed to be poor.
The Tendulkar committee made the poverty line multidimensional, by considering several other expenditures other than just food. An immediate impact of this was that the poverty ratio for 2004-05, went up from 27.5% to 37.2% of the total population. From that level the poverty ratio has come down to 21.9% in 2011-12.
So prima facie this sounds good. The trouble crops up when Rs 816/Rs 1000 per month is converted into expenditure per day. Assuming 30 days in a month, this expenditure comes to Rs 27.5 per day for the rural areas and Rs 33.33 for urban areas. Hence, anyone whose expenditure per day is less than these amounts is categorised as poor.
Having already linked the reduction in poverty to the social sector schemes launched by the government, the Congress spokespersons had to defend the Rs 27-33 per day expenditure cut off for poverty.
Even today in Mumbai city, I can have a full meal at Rs 12. No no not vada paav. So much of rice, dal sambhar and with that some vegetables are also mixed ,” film star turned politician Raj Babbar told reporters.
Rasheed Masood, a Congress leader from Delhi, went a step further and said “You can eat a meal in Delhi in Rs 5 I don’t know about Mumbai. You can get a meal for Rs 5 near Jama Masjid.”
Farooq Abdullah of the National Congress, a constituent of the UPA, said that even Re 1 was enough to satisfy hunger. “If you want, you can fill your stomach for Re 1 or Rs 100, depending on what you want to eat,” Abdullah said.
Of course these gentlemen were trying to justify the unjustifiable. Rs 27-33 per day expenditure as a cut off for poverty is too low. But the argument is not as simple as that. As we saw the current poverty line is an improvement on the earlier line. There has been a lot of criticism of the late Suresh Tendulkar, who headed the committee that redefined the poverty line. As T N Ninan wrote in the Business Standard “The late Suresh Tendulkar, who redefined the line some years ago, has come in for unfair criticism – because he actually raised the poverty line substantially. The result was that what was 27 per cent poor in 2004-05 under the old definition became 37 per cent using Tendulkar’s definition.”
The simple solution it seems is to increase the poverty line. But as this writer explained earlier, increasing the poverty line has its own serious repercussions.
Also, even if we were to increase the poverty line, the percentage of decline of in poverty will remain the same. As Pronab Sen, chairman of the National Stat­istical Commission, told Outlook “even if we double the norm from Rs 33 for urban poor and Rs 28 for rural poor, the percentage of people below poverty line may double but the percentage of decline in poverty will remain roughly the same.”
Economist Bhaskar Dutta wrote something along similar lines in a column in The Indian Express. “the dramatic reduction in poverty according to the Planning Commission estimate also guarantees that there would be a sizeable reduction even if the poverty line were set a higher level.”
And this fall in poverty, irrespective of where we set the poverty line at, has been substantial. As Swaminathan Aiyar wrote in The Times of India “India has just reduced its number of poor from 407 million to 269 million, a fall of 138 million in seven years between 2004-05 and 2011-12 . This is faster than China’s poverty reduction rate at a comparable stage of development, though for a much shorter period.”
Instead of trying to make these slightly nuanced points the Congress party got stuck with justifying the poverty line cut off. The trouble was that it couldn’t go on and on about the “poverty has come down message”, simply because through the food security ordinance the party plans to distribute heavily subsided(almost free) rice and wheat to nearly 82 crore people or around 67% of the country’s population.
If the poverty has actually come down then the
garibi hatao politics that the Congress party has been successfully peddling for nearly four decades, wouldn’t find any resonance any more. It would hit at the heart of the business model of the Congress party.
Hence, the party has done a quick volte face on the poverty line and is now vociferously criticising it. “If the Plan panel said those who live above Rs 5,000 a month are not at poverty line, obviously there is something wrong with the definition of poverty in this country. How can anybody live at Rs 5,000?” union minister Kapil Sibal asked at a public function.
The Congress general secretary, Digivijaya Singh, was also critical of the poverty line. “I have always failed to understand the Planning Commission criteria for fixing poverty line. It is too abstract can’t be same for all areas,” he tweeted.
Rajeev Shukla, Minister of State for Parliamentary Affairs, also joined his senior colleagues in criticising the poverty line. In fact, he went a step further and totally disowned it. “I want to demolish this myth that the poverty line has been fixed by the government. Government has not fixed any poverty line. This recommendation has been made by an expert panel headed by Mr. Tendulkar. This is a report of the Tendulkar Committee which has been put forward by the Planning Commission. Neither the Government has accepted it nor has it fixed it,” he said.
So, does Mr Shukla mean that the Planning Commission is different from the government and is not a part of the government? I guess some history is in order here. The website of the Planning Commission clearly points out that “The Planning Commission was set up by a Resolution of the Government of India in March 1950 in pursuance of declared objectives of the Government to promote a rapid rise in the standard of living of the people by efficient exploitation of the resources of the country, increasing production and offering opportunities to all for employment in the service of the community.”
Over and above this the Planning Commission is headed by the Prime Minister, who currently happens to be Manmohan Singh. So how can the Planning Commission be different from the government? Manmohan Singh as always has been made the scapegoat by the Congress party here as well.
Meanwhile, there is another committee at work with the brief to come up with a new better poverty line. This line will be needed to justify the massive food security scheme. If only 21.9% of India’s population is poor, then its difficult for the government to justify distributing heavily subsidised rice and wheat to nearly 67% of India’s population.
So what is needed is a new poverty line which shows that 67% of India’s population is actually poor. As Aiyar put it in his column “The government found it difficult to say this was good politics even if it was bad economics. Instead, it appointed the Rangarajan Committee to devise a higher poverty line.”

The article originally appeared on on July 29, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)

Food Security Bill: What PM, other jholawalas can learn from Indira Gandhi

Vivek Kaul
Prime Minister Manmohan Singh tweeted yesterday saying that “the Food Security Bill is a very important legislation for the Govt. The UPA is committed to make this law after considering all opinions.” But the hurry in which the Congress led UPA seems to be to get the Food Security Bill passed, largely negates Singh’s statement.
Nevertheless, since Singh has stated that he is in the mood to consider all opinions, here are a few points that he as an economist and the Prime Minister of India, should take into consideration.
These points are over and above the points that this writer made in a column yesterday. (10 reasons why Amartya Sen is wrong about food security bill)
The Bill envisages to distribute highly subsidised food grain to almost two-thirds of India’s population of 1.2 billion and in its current form is a sheer recipe towards financial disaster and consequently very high inflation. Here are a few points that suggest the same:
1. Currently the government procures rice and wheat from farmers at 
mandis throughout the country. The state governments are allowed to implement a mandi tax, which the procurer of grains, in this case the government working through the Food Corporation of India (FCI)) or any of the state agencies, has to pay. The central government meets the entire expenditure incurred by the state governments on procuring rice and wheat.
Punjab has a 
mandi tax of 14.5% on top of the minimum support price. In case of Haryana the mandi tax is around 11%. This is a major source of revenue for these governments. As Sunil Jain pointed out in a recent column in The Indian Express “The mandi taxes accounted for nearly 18 per cent of the state’s(i.e. Punjab) taxes. In the case of Haryana, mandi taxes accounted for around 7 per cent of the state’s own tax revenues.”
The possibility that states might increase the 
mandi tax, exists. In fact it is already happening. “Orissa hiked its mandi tax on paddy from 8.5 per cent to 12 per cent,” writes Jain.
In fact, it is in the interest of states to increase their 
mandi tax. One reason, as already pointed out, is the fact that mandi tax is an easy source of revenue. The second reason is that implementing a mandi tax on the minimum support price allows states to give out a bonus to its farmers over and above the minimum support price(MSP) which the central government sets.
As an editorial in Business Standard points out “Madhya Pradesh has gone a step further and has begun offering hefty bonuses – Rs 100 a quintal last year, hiked to Rs 150 this year – on top of the minimum support price to maximise procurement. Though the fiscal burden of the bonus is borne by the state government itself, this is offset to a large extent by the higher tax collection from increased procurement as a result of this incentive.”
This is something that Jain also writes about in the Indian Express “Typically, the state government buys the grain on behalf of the FCI and then bills it for this. So if a state now announces a “bonus” of 20 per cent, it promises to buy the grain brought by the farmers at Rs 120 per unit. This is not just fiction, Madhya Pradesh offers farmers 11 per cent more for wheat and Chhattisgarh 22 per cent more for paddy (i.e. rice).”
Now how does this link up with the Food Security Bill? Nearly two thirds of the Indian population is expected to be eligible for subsidised rice and wheat under the Food Security Bill, as and when it becomes an Act. This means that the procurement of rice and wheat by the government will have to go up. As the procurement goes up, so will the total amount of 
mandi tax being collected by the state governments.
This will mean higher expenditure for the central government. A higher expenditure will mean the government running a higher fiscal deficit. Fiscal deficit is the difference between what a government earns and what it spends.
It is in the interest of the state governments to increase 
mandi tax and thus award a higher bonus to farmers on top of the minimum support price. “Little wonder that Madhya Pradesh last year emerged as the second largest procurer of wheat, after Punjab, relegating Haryana to the third spot…Taking a cue, Chhattisgarh, which has now become surplus in rice…has stepped up market levies on these purchases,” the Business Standard points out. With the Food Security Bill becoming an Act this phenomenon is likely to increase.
2. With Food Security Bill becoming an Act, the government will have to procure more rice and wheat than it does now. The trouble is that FCI does not have economies of of scale i.e. its cost of procurement goes up as it procures more. One reason for this is the increasing cost of labour.
As a report titled titled National Food Security Bill: Challenges and Options authored by Ashok Gulati, Jyoti Gujral and T.Nandakumar (with Surbhi Jain, Sourabh Anand, Siddharth Rath, and Piyush Joshi) belonging to the Commission for Agricultural Costs and Prices (CACP), which is a part of the Ministry of Agriculture, points out “For the quarter ending March, 2012, FCI employed 1.55 lakh workers out of which 1 lakh are contract workers, 19441 are departmental labour, 30112 are Direct Payment system (DPS) workers…The average handling cost per metric tonne for FCI for 2010-11 for contract labour was Rs 41.4 while for departmental labour, it was Rs 311.1 (7.5 times the cost of contract labour) and for workers under the DPS it was Rs 136.9 (3.3 times the contract labour). This indicates contractual labour of FCI were the least expensive. However, the Ministry of Labour and Employment, has prohibited employment of contract labour in the depots of FCI.”
So what this means that in the years to come contract workers and direct payment system workers are likely to be regularised. This will raise costs of labour by three to seven times. This extra cost will have to be borne by the central government. This again means higher expenditure for the government and hence a higher fiscal deficit.
Expenditures like this one are not taken into account when the jholawalas in favour of food security point out that the right to food security will cost Rs 1,00,000 -1,20,000 crore per year. As this writer mentioned in a column yesterday, the CACP find this estimate of the government, just the tip of the iceberg. This expenditure does not take into account “additional expenditure (that) is needed for the envisaged administrative set up, scaling up of operations, enhancement of production, investments for storage, movement, processing and market infrastructure etc.” The CACP estimates that “the total financial expenditure entailed will be around Rs 682,163 crore over a three year period.” Imagine what this will do to the fiscal deficit of the government along with fuel and fertiliser subsidies and NREGA. What do the 
jholawalas have to say about that?
3. The right to food subsidy is currently structured as an unlimited subsidy. The government will buy as much rice and wheat the farmer can bring to it to sell. In fact, given the scope of the right to food security the government may have to buy as much rice and wheat that it can lay its hands on. But with the government buying huge amount of rice and wheat, what will it do to the availability of these grains in the open market? What will be the impact on their price? Are these questions even being considered?
In fact this is already playin out over the last few years. As the CACP report points out “Since 2006-07, the procurement levels for rice and wheat have increased manifold…Currently, piling stocks of wheat with FCI has led to an artificial shortage of wheat in the market in the face of a bumper crop. Wheat prices have gone up in domestic markets by almost 20 percent in the last three months alone (in the three months upto December 2012, when the CACP report was released), because of these huge stocks with the government that has left very little surplus in markets.” CACP expects this phenomenon to get more pronounced if Right to Food Security Bill becomes an act.
4. Increasing nutrition is a major goal of the Right to Food Security Bill. But the way it is currently structured it will work against this goal. As an editorial in the Indian Express points out “In fact, the food security bill will do little to genuinely address the real nutritional needs of the nation, but will distort the grain market, and saddle the system with yet another legal entitlement that cannot be undone. NSSO (National Sample Survey Office) data shows that per-calorie food consumption is falling not because large parts of India cannot feed themselves basic grain, but because they are turning to better food like protein, vegetables, tea etc.”
But with the farmers getting a fixed price for rice and wheat they are less likely to produce other food products. As the CACP report points out ““Assured procurement gives an incentive for farmers to produce cereals rather than diversify the production-basket…Vegetable production too may be affected – pushing food inflation further.”
5. In fact state governments are already trying to procure more and more grain than they had in the past. As the Business Standard editorial referred to earlier points out “Bihar, only a marginally wheat surplus state, has this year set up more grain procurement centres than the major wheat-growing states of Punjab, Haryana and Uttar Pradesh put together. These, obviously, are trends that need to be restrained. One of their untenable fallouts is the mopping up of the wheat surplus in the peak season by the government, which is tantamount to virtual nationalisation of the foodgrain business.”
This is something that even Indira Gandhi, the biggest political socialist that India has ever seen and the biggest 
jholawala of them all, tried to do in 1972-73 and failed miserably. She nationalised the wholesale trade in food grains, a decision which had to be reversed in a few weeks as it lead to escalating prices and total chaos. Indira Gandhi made big blunders as Prime Minister of India, ramifications of which are still being borne, but this was one prospective blunder she corrected quickly. This can be a source of inspiration for Manmohan Singh and the jholawalas who advise Sonia Gandhi, because the virtual nationalisation of foodgrain business will be disastrous.
As the CACP report points out “The government already procures one-third of the cereals production and any increase in procurement will have enormous ramifications on the cereal economy/markets and would crowd out private sector operations with a consequent effect on open market prices.”
6. The 
jholawalas in favour of right to food security keep pointing out towards the success of public distribution systems in states like Tamil Nadu and Chattisgarh. What they do not realise is that if Right to Food Security Bill becomes an Act, the central government will prevail over the state governments. “Once the Act comes into effect the existing schemes pursued by the states will suffer considerably…The National Food Security Bill(NFSB) however creates a new statutory framework governing the public distribution system (PDS)PDS systems in states will have to first comply with the NFSB and in the event of a conflict…the provisions, rules, regulations and orders issued under the NFSB will override.” Hence, systems which have been successful in states may not be in operation anymore.
To conclude, the right to food security will usher in an era of very high food inflation ( as if its not high already). It will also push up government expenditure and in turn its fiscal deficit. This will add to inflation. As Ashok Gulati, the Chairman of the Commission for Agricultural Costs and Prices and Shweta Saini an independent researcher, write in a research paper titled 
Taming Food Inflation in India “Based on the empirical results of the econometric analysis, it is suggested that the policies to rein-in food inflation will foremost require winding-down fiscal deficit, which has gone (above 8% of GDP for Centre and States combined).”
The right to food security will work exactly in the opposite way and push up food and overall inflation, which in turn will hurt those it is expected to benefit.

The article originally appeared on on May 9,2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)