PM Modi, Nehruvian Economic Policies Aren’t Going to Get Us Anywhere

This is something that we should have written on a while back, but as they say it is better late than never.

In the annual budget of the government of India, presented earlier this month, the finance minister Arun Jaitley raised custom duties on a whole host of products. In his speech, Jaitley made it clear that this wasn’t a one-off thing, but a change in policy direction.

As he said: “In this budget, I am making a calibrated departure from the underlying policy in the last two decades, wherein the trend largely was to reduce the customs duty. There is substantial potential for domestic value addition in certain sectors, like food processing, electronics, auto components, footwear and furniture. To further incentivise the domestic value addition and Make in India in some such sectors, I propose to increase customs duty on certain items. I propose to increase customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%. This measure will promote creation of more jobs in the country.”

The customs duty has been raised on around 45 products. The maximum increase was in case of cranberry juice from 10% to 50%. (All you cranberry juice drinkers out there, maybe it is time to start appreciating the taste of chilled filtered water with a dash of lemon in it).

The idea as Jaitley explained is to create jobs within the country. With increased custom duties, imported goods will become expensive. This will make domestic goods competitive. As people buy more and more of domestic goods, the companies producing goods in India will do well. Once they do well, they will expand and create jobs in the process. Alternatively, because imports will become uncompetitive, the domestic companies can continue operating, and jobs can thus be saved. QED.

The problem with this argument is that it stinks of Nehruvian era economic policies, in particular import substitution, which was the norm in independent India, up until the economic reforms of 1991. Import substitution as a policy was introduced by Jawahar Lal Nehru and carried forward by Indira Gandhi, two individuals, the Bhartiya Janata Party keeps blaming for everything that is wrong in this country (even though we are four years into the term). At its simplest level, import substitution is basically an economic policy which promotes domestic production at the cost of imports. And it is an economic policy, which doesn’t work.

As the French economist Jean Tirole writes in Economics for the Common Good: “In economic matters too, first impressions can mislead us. We look at the direct effect of an economic policy, which is easy to understand, and we stop there. Most of the time we are not aware of the indirect effects. We do not understand the problem in its entirety. Yet secondary or indirect effects can easily make a well-intentioned policy toxic.”

What does Tirole mean here? Another French economist Frédéric Bastiat explains what secondary or indirect effects are, through the broken window fallacy.

Bastiat basically talks about a shopkeeper’s careless son breaking a pane of a glass window. He then goes on to say that those present would say: “It is an ill wind that blows nobody good. Everybody must live, and what would become of glaziers if panes of glass were never broken.

The point being that if windows weren’t broken, how would those repairing windows, the glaziers that is, ever make a living. This seems like a fair question to ask, but things aren’t as simple as that.

As Bastiat writes in Essays on Political Economy: “This form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.”

Bastiat then goes on to explain what exactly he means by this. Let’s say replacing the pane of the broken window costs 6 francs. This is the amount that the shopkeeper pays the glazier. If the shopkeeper’s son would not have broken the window there was no way that the glazier could have earned these six francs.

As Bastiat puts it: “The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.” This leads us to conclude that breaking windows is a good thing because it leads to money circulating and those who repair broken windows doing well in the process.

Nevertheless, this is just one side of the argument. As Bastiat writes: “It is not seen that our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps have replaced his old shoes, or added a book to his library. In short, he would have employed his six francs in some way which this accident prevented.”

How does this apply in the case of the Narendra Modi government increasing custom duties on a whole host of products? The seen effect of this, as already explained above, is that domestic Indian companies can compete with cheaper imports because of the custom duties being increased. This is likely to create jobs and if not, it is at least likely to save jobs. This is the first order effect or the seen effect.

What is the second order effect or the unseen effect? It is well worth remembering here that consumers only have so much money to spend. If cheaper imports no longer remain cheaper because of an increase in custom duties, the consumers have to pay a higher price for the goods made by domestic companies. Once this happens, they are likely to cut their spending on some other front.

The trouble is that this some other front on which consumers cut their spending, is not easily identifiable. Once consumers cut their spending on other fronts, some domestic businesses are not going to do well, and jobs will be lost there. The trouble is this is not something which is very obvious. It is an unseen effect.

If the consumers keep spending the same amount of money as before, they will end up cutting down on their savings, which isn’t necessarily a good thing. As Henry Hazlitt writes in Economics in One Lesson: “The fallacy… comes from noticing only the results that are immediately seen, and neglecting the results that are not seen.”

Another point that needs to be made here is that the domestic companies are organised well enough to lobby with the government. The end consumer never is.

Increasing customs duties is not a solution to creating jobs. For jobs to be created Indian firms need to be globally competitive. When companies produce for the global market, they need to compete with the best in the world. This automatically leads to a situation wherein the products which a company produces need to be globally competitive. On the other hand, when import substitution is the norm and companies need to produce just for the internal market, almost anything goes. This explains why the Indian corporate sector on the whole, has not been able to be competitive on the global front. It has still not been able to come out of the import substitution era. (We hope people do remember the Ambassador Car which had the same engine between 1944 and 1982.)

In order to be globally competitive, India needs to introduce a whole host of reforms, from labour law reforms to land reforms. It needs to start pricing electricity correctly. The governments need to control their fiscal deficits to ensure that they don’t push up interest rates in the long-term. Our education system needs a paradigm shift (We find this phrase absolutely cringeworthy, but nothing explains the situation better). The corporate bond market needs to function much better than it currently is. The number of inspectors that an average business needs to deal with has to come down. The paper work needs to be simplified. All these distortions in the system need to go.

Long story short—going back to Nehruvian economics is not going to do any good to the country. The sooner Narendra Modi understands this, the better it will be for India. India has suffered enough because of the mess initiated by the economic policies of Nehru and Indira Gandhi. And there is no point, going back to it.

The column originally appeared in Equitymaster on February 19, 2018.

Note to Rahul: India sucks at producing rakhis and Ganeshas

rahul gandhi
Vivek Kaul
Economist Arvind Panagariya has  written an open letter to Rahul Gandhi, on the edit page of today’s edition of The Times of India. In this piece Panagariya answers Gandhi’s query to Indian industrialists, as to why India has to import ganeshas and rakhis from China and can’t produce them on its own.
Panagariya’s answer is very simple. India sucks at labour intensive manufacturing. As he writes “our top industry leaders are very comfortable doing what they do: invest in highly capital-intensive sectors such as automobiles, auto parts, two wheelers, engineering goods and chemicals or in skilled-labour-intensive goods such as software, telecommunications, pharmaceuticals and finance. The vast labour force of the nation stares them in the face but they look the other way.”
This is the major reason as to why India cannot compete with China in manufacturing rakhis and ganeshas. But some historical context also needs to be built in, in order to completely appreciate India’s lack of competitiveness on this front.
Prasanta Chandra Mahalanobis founded the Indian Statistical Institute in two rooms at the Presidency College in Calcutta (now Kolkata) in the early 1930s. He became close to Jawahar Lal Nehru, the first prime minister of India, and was appointed as the Honorary Statistical Advisor to the government of India.
As Gurcharan Das writes in 
India Unbound –From Independence to the Global Information Age “Mahalanobis had a profound effect on Nehru’s thinking, although he held no offcial position. His title, “Honorary Statistical Advisor to the Government of India,” certainly did not reflect the extent of his influence. His biggest contribution was the draft plan frame for the Second Five Year Plan…In it he put into practice the socialist ideas of investment in a large public sector (at the expense of the private sector), with emphasis on heavy industry (at the expense of consumer goods) and a focus on import substitution(at the expense of export promotion).”
Hence, big heavy industry became the order of the day at the cost of small consumer goods. The alternative vision of encouraging the production of consumer goods was put forward as well. As Das writes “It belonged to the Bombay (now Mumbai) economists CN Vakil and PR Brahmanand. It was neither glamourous nor as technically rigorous as Mahalnobis’s, but it was more suited to the underdeveloped Indian economy. Its starting point was that India lacked capital but had plenty of people…The thing to do was to put these people into productive work at the lowest capital cost. The Bombay economists suggested that we employ the surplus labour to produce “wage goods,” or simple consumer products – clothes, toys, shoes, snacks, radios, and bicycles. These low-capital, low-risk, business would attract loads of entreprenurs, for they would yield quick output and rapid returns on investments. Labour would produce the goods it would eventually consume with the wages it earned in producing the goods.”
But Mahalanobis’s vision of an industrialisted India sounded a lot sexier to the politicians led by Nehru who ran this country and hence, won in the end.
The Indian industrialists had done their cause no good by drafting and accepting the Bombay Plan in 1944. “In 1944, India’s leading capitalists had come together in Bombay and crystalllized their vision for a modern, independent India. They inclued the giants of Indian business – JRD Tata, GD Birla, Lala Shri Ram, Kasturbhai Lallabhai, Purshotamdas Thakurdas, AD Shroff and John Mathai – they produced what came to be known as the Bombay Plan,” writes Das.
The Bombay Plan put forward the idea of rapid and self reliant industrialisation of business in India. At the same time the businesses were willing to accept “import limitations on the freedom of private enterprise”. “Even more disastrous was their acceptance of a vast area of state control – in fixing prices, limiting dividends, controlling foregin trade and foreign exchange, in licensing production, and in allocating capital goods and distributing consumer goods. Without realising it, the Indian capitalists had dug their graves,” writes Das.
Hence, the government became the 
mai baap sarkar which gave out licenses for everything. And the Indian businessman if he had to survive had to become a crony capitalist to get these licenses. This was initiated during the regime of Jawahar Lal Nehru and perfected during the rule of his daughter Indira Gandhi.
The orientation of the Indian government was towards setting up big industries. What they did not want to set up themselves, they would give licenses to the private sector. And in order to get licenses a businessman had to be close to the government.
This ensured that both the government as well as the private sector set up and continue to set up capital intensive businesses. This is reflected in the slow growth of the number of workers working in private sector etablishemnts with ten or more people. As Jagdish Bhagwati and Arvind Panagariya write in their book 
India’s Tryst with Destiny – Debunking Myths that Undermine Progress and Addressing New Challenges. “The number of workers in all private-sector establishments with ten or more workers rose from 7.7 million in 1990-91 to just 9.8 million in 2007-2008. Employment in private- sector manufacturing establishments of ten workers or more, however, rose from 4.5 million to only 5 million over the same period. This small change has taken place against the backdrop of a much larger number of more than 10 million workers joining the workforce every year.”
Hence, an average Indian business starts off small and continues to want to remain small. “An astonishing 84 per cent of the workers in all manufacturing in India were employed in firms with forty-nine or less workers in 2005. Large firms, defined as those employing 200 or more workers, accounted for only 10.5 percent of manufacturing workforce. In contrast, small- and large-scale firms employed 25 and 52 per cent of the workers respectively in China in the same year,” write Bhagwati and Panagariya.
What is true about manufacturing as a whole is also true about apparels in particular, a very high labour intensive sector. Nearly 92.4% of the workers in this sector, work with small firms which have 49 or less workers. In comparison, large and medium firms make up around 87.7% of the employment in the apparel sector in China.
The labour intensive firms in China ensure that they have huge economies of scale. This drives down costs and explains to a large extent why India imports ganesha idols and rakhis from China. Everyone wants a good deal. And China is the country providing the good deals and not India.
A major reason for Indian firms choosing to remain small is the fact that the country has too many labour laws. Since labour is under the Concurrent list of the Indian constitution, both the state government as well as the central government can formulate laws on it. As Bhagwati and Panagariya point out “The ministry of labour lists as many as fifty-two independent Central government Acts in the area of labour. According to Amit Mitra(the finance minister of West Bengal and a former business lobbyist), there exist another 150 state-level laws in India. This count places the total number of labour laws in India at approximately 200. Compounding the confusion created by this multitude of laws is the fact that they are not entirely consistent with one another, leading a wit to remark that you cannot implement Indian labour laws 100 per cent without violating 20 per cent of them.”
This explains to a large extent why Indian businesses do not like to become labour intensive and choose to stay small. The costs of following these laws are huge. As Bhagwati and Panagariya write “As the firm size rises from six regular workers towards 100, at no point between these two thresholds is the saving in manufacturing costs sufficiently large to pay for the extra cost of satisfying the laws.”
In fact, Bhagwati and Panagariya narrate an interesting anecdote told to them by economist Ajay Shah. Shah, it seems asked a leading Indian industrialist about why he did not enter the apparel sector, given that he was already making yarn and cloth. “The industrialist replied that with the low profit margins in apparel, this would be worth while only if he operated on the scale of 100,000 workers. But this would not be practical in view of India’s restrictive labour laws.”
This is the answer to Rahul Gandhi’s question of why India imports rakhis and ganeshas from China. Like is the case with almost every big problem in this country, even this is a problem created by his ancestors.

The article originally appeared on on November 18, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 

It’s luck: Explaining Sonia’s rise, BJP’s 2004 loss and cricket debuts


Vivek Dehejia is an economics professor at Carleton University in Ottawa, Canada. He is also a regular economic commentator on India for the New York Times India Ink. He has most recently co-authored Indianomix – Making Sense of Modern India (Random House India, Rs 399) along with Rupa Subramanya. The book is along the lines of international bestsellers like Freakonomics and The Undercover Economist, and tries to answer a wide array of questions ranging from why did Jawaharlal Nehru did not see the 1962 war with China coming even though there was a lot of evidence to the contrary, to why seatbelts don’t save lives. Dehejia speaks to Vivek Kaul in an exclusive interview. Excerpts:
One of the controversial ideas in your book is that the BJP’s India Shiningcampaign of 2004 was not as much a disaster as is made out to be. Why?
I am glad you asked that. We think it is one of the interesting contributions of the book. I would agree with you that it is a controversial hypothesis because we have this received narrative of the 2004 election – which is that the poor voter had punished the BJP/NDA for the triumphalist India Shining campaign. Even the BJP bought into this interpretation. This has had far-reaching consequences. If you look at the political history of India since 2004, what was the lesson that was drawn? The lesson that everyone drew from the so-called disaster of the India Shining campaign was that you cannot win an election based on economic reform, economic policy and economic success.
And you don’t agree the India Campaign was a disaster…
Our argument here is that if you look at the numbers, if you look not just at the seats won but at the vote shares as well, you get a different story. Yes, there was a swing away from the NDA, but the actual vote share difference between the NDA and the UPA was just over 2 percent. The NDA won 33.3 percent of the vote and the UPA won 35.4 percent of the vote. For us that 2 percent difference in vote share can equally be attributed to a number of other explanations, such as bad luck, as it is to anything else.
Or let me put in another way; if you look at those results, basically it came down to a coin toss. A third of the voters voted for the NDA, another third voted for the UPA and a third voted for somebody else. As we see it, the role of luck and randomness in an outcome should not be underestimated.
That’s a very interesting point…
The NDA might well have won the election. And, in fact, they actually would have won if the DMK hadn’t pulled out their 16 seats at the last minute. And that really was what made the difference. Hence it is very difficult to conclude that it was the voters punishing India Shining. In all Indian elections, there are many regional and local issues at play and then there are issues about the complex way in which alliances work. Our point in the chapter really is that it is a very appealing narrative. We like to have these very convincing explanations because to say well, you know, it was bad luck doesn’t seem like a very satisfying explanation. But if we know that the BJP lost because they had this India Shiningcampaign and the poor voters punished them for it, that appeals to human psychology. We want to have a convincing story that explains everything.
A convincing and simple story that can be broadcast on TV..
That’s right. A story that can fit into a sound byte.
You also talk about the role of luck in Sonia Gandhi‘s life. If it was not at play she would not have ended up at where she is now…
We sort of tell the story as to how she met Rajiv Gandhi at a particular Greek restaurant in Cambridge, England, on a particular day in 1965. That itself was a chance event. Maybe if she did not like Greek food, or if she had gone on a different day! And the number of chance occurrences it took to go from being the shy Italian housewife that she was to being the most powerful person in the country. It took two assassinations and five unexpected deaths. The assassinations, of course, of her mother-in-law and her husband, and then the deaths of five senior Congress leaders (which included Rajesh Pilot, Sitaram Kesri and Madhavrao Scindia). The probability of that happening is so small that you have to call that an accident of fate. Or luck. Or randomness. Or whatever you want to call it.
Any other interesting examples on luck?
We have this study by Shekhar Aiyar and Rodney Ramcharan, two economists of the IMF, who look at the role of luck in test cricket. And they found, amazingly, that the advantage of debuting at home for test cricketers actually had a long lasting effect on their careers – which was really surprising. You would think that if you debut at home, sure it would effect your performance in the debut series, but in fact it has a long-lasting effect.So basically people who debut at home end up playing a lot more…
That’s right. Selectors unfairly punish those who debut abroad and don’t do well. Therefore, you are more likely to be dropped from the side once you debut abroad and don’t do well. But also there could be some learning by doing here. If you debut at home you are able to hone your skills and technique on your home turf and, therefore, you become a better player. Both things could be going on there. But the bottomline is that it is a result of luck because these Test schedules are set months and years in advance, and when someone is picked up for the national side is really the luck of the draw.
An extended portion of your book deals with Jawaharlal Nehru and the fact that for a very long period of time he did not see things heating up with China in 1962, despite there being evidence to the contrary. What is the broader point that you were trying to make?
That forms a central part of our chapter on cognitive failure when we draw on recent behavioural economics literature. The point and the purpose of looking at Nehru in the lead up to the 1962 war was how could something so obvious be missed. It had become clear at that point that China was flexing its muscles. It was a nationalistic state and the border issue was going to be a real problem. But the fact was it apparently caught Nehru by surprise. He himself admitted that he was more or less been living in a dream world before the war. He said: “We were living in an artificial atmosphere of our own creation”. So how could Nehru’s own assessment have been so far off the mark and have changed so radically over a short span of time?
And what did you figure out?
Certainly, one of the several possible interpretations is that Nehru and Krishna Menon (the Defence Minister when the Chinese attacked India) and people around them had succumbed, perhaps to a cognitive failure, where they couldn’t perceive the Chinese threat for what it was. They were looking at it through a different lens.Could you explain that in some detail?
Krishna Menon, for example, was ideologically towards the left and he found it very hard to accept that China, being a socialist state and being an Asian power, could have any threatening impulses towards India. This showed an ideological blind spot to Chinese nationalism that had been detected as long back as 1950 by the shrewd Vallabhbhai Patel. So the broader point we were trying to make is that a strongly-held ideological view can blinker you to some realities that don’t fit in with that view. There is this pattern that one sees where  leaders can become overconfident in a lead-up to a crisis because what is happening doesn’t fit their world view of things.
From Nehru you jump to rail accidents in Mumbai…
Yes. A staggering 15,000 people die on railway tracks throughout India every year. Of this 40 percent, or about 6,000 deaths, take place in Mumbai alone on the suburban railway network.
And why is that?
If you look at it from a strictly conventional economic point of view, there is a cost-benefit calculation. So someone who is crossing the tracks at an unfenced point will reckon that he is saving the time it would take for him to get to the next safe crossing, i.e. the foot over-bridge. But that foot over-bridge could be several kilometres away from where he is. If, say, you are a daily wage labourer who has get to the construction site and give your name to the foreman, if you arrive half an hour or 45 minutes late you might miss out on a day of work and so the day’s wages. So the cost can be pretty high. That would be the end of the story from conventional economics and you would say let’s build more foot overbridges to reduce the time cost.
But that is not the whole story?
Let me tell you a little story. Biju Dominic, a former ad man and a co-founder of FinalMile, learned about the daily tragedies on the Mumbai rail system while teaching a class at the railway staff college. So he and his team started gathering some data. They realised that 85 percent of those trying to cross tracks were adult males. Of course, this may also reflect the fact that it is mostly men who are trying to cross the tracks. Also children were most adept at crossing tracks. An interesting finding was that people who are used to crossing tracks tend to underestimate the danger to their lives. This is a classic example of the overconfidence bias, along similar lines that had happened in Nehru’s case before the 1962 war with China. While crossing they don’t consciously realise the risks they are taking. They filter out the boiler plate warning signs and the text signs.
That’s very interesting…
So given the possibility of cognitive failure, it’s possible that some targeted interventions might change that tradeoff. FinalMile came up with three specific interventions. First, they painted alternate sets of railway ties (that’s the series of metal beams that connect the two ends of the track) a bright yellow. This was to help compensate for the psychological fact that people tend to underestimate the speed of large moving objects. With an alternate set of ties painted yellow, someone would be better able to gauge the speed of an oncoming train as it as it passed from the painted to the unpainted ties. Suppose you are in a high a speed train and you are looking out at the landscape, it is hard to tell how fast you are going, unless there is some reference point for the speed. That was one nudge.
What was the second one?The second one was to get the train drivers to switch from a single long warning whistle to two short staccato bursts. Again, this was based on neurological research that showed that the human brain was more receptive to sound that was separated by silence. And the third, the most striking nudge, was an image. People tend to filter out generic boiler-plate kind of warnings. So here they actually hired an actor to portray the wide-eyed horror of someone about to be crushed by an oncoming train and made a poster of it. The poster was vividly visceral enough to really get to someone’s gut, to effect someone psychologically. It is much harder to filter out something like that vis-a-vis a generic sign which says it’s dangerous, don’t cross here. And the poster was put up at points were people crossed tracks. Those were the three interventions.
And how are the results?
They started at Wadala. In the first half of 2010, the number of deaths dropped by 75 percent to nine from the previous year. When we spoke to them in February this year we were told that railways were rolling it out at the Mulund, Vikhroli and Ghatkopar stations. But the other point that we note there is that the success of that really won’t show up in any kind of statistic because if someone looks at the poster and decides not to cross or makes it across safely because of the yellow paint on the ties, it will be the absence of a statistic.
Another interesting piece of research you talk about are seat-belts…
Our inspiration is this classic 1975 article by Sam Peltzman, at the university of Chicago, who wanted to test whether seat-belts saved lives in the United States (US) where everyone had just assumed without argument that seat-belts must save lives. And what Peltzman found was that, in the US, that turned out not be the case. What was going on was that since the cars were now safer, the driving became more rash. The human reaction was, now that my car is a little safer, I can drive a little faster and I don’t need to worry as much about getting into an accident. The human behaviour offset the effects of a well-meaning government programme.
You can find examples of this everywhere. We give an example of sports equipment. There is some evidence now that in team sports where there is a lot of protective gear, you actually see more violence on the pitch. So American football and ice-hockey have a lot more protective gear and so you get a lot more violence. It’s the same thing because the players feel safer as drivers feel when they wear the seat-belt. But in soccer there is relatively very little protective gear and hence very little violence.
How does the seat-belt thing work in an Indian context?It’s not been very much studied but we found this one interesting study by Dinesh Mohan at IIT Delhi. The Delhi seat-belt law came into effect in 2002. What he found was that seat-belts saved very few lives. If you look at his paper, he concludes that the seat-belt law at most saved around 11-15 lives per year in Delhi out of nearly 2,000 fatalities.
Why was that the case?
There are two things going on here. The fatality rate for drivers and front seat passengers was already relatively low. And that dropped a bit after the seat-belt law came in. The deeper explanation is that most of the victims are not the front-seat passengers or the drivers. They are the other people. They are pedestrians. They are two-wheeler drivers. And others. With seat-belts in place drivers are essentially transferring the risk from themselves to the pedestrians.
An interesting part of your book is where you talk about how Indian states that were ruled by native princes are doing much better economically than the states that were ruled directly by the British. Could you tell us a little bit about that?

One of the questions that we like to ask in India is what if we hadn’t been ruled by the British, would we have done better? Or questions like: were the British good for India? And here there are all spectrum of opinions. There was a debate published an American magazineThe New Republic between Niall Ferguson and Amartya Sen which looked at this question. Sen wrote that had India not been colonised by the British then it might have evolved in a different (and) better way than with the colonisation. Then Ferguson replied to that. And Sen had a rejoinder. Ferguson is very much a believer in the British Empire. His argument is that the British Empire in its later phase did a lot of good for its colonies by integrating them into global trade and finance.
So what is the point you are trying to make?
It is very tempting to say that Indian economic performance or growth stagnated during 190 years or 200 years of British rule, and then growth began to take off after independence. The point we make is that by itself it tells you nothing and you have to have a counter-factual scenario. What are you comparing it with? And this is where we draw on the research of Lakshmi Iyer of the Harvard Business School.
What is this research about?
She very interestingly compares the economic performance post-independence of those regions which were directly ruled by the British as against those which were ruled by the princes of princely states. And she shows statistically that the native-ruled regions have done better on average even post-independence. And that is a very striking result. One sort of hypothesis is that the British, to the extent that they were more likely to rule states that generated taxation revenue for them (because tax on land and agriculture was a big source of revenue), may not have invested so much in physical capital and human capital as the Maharajas and Nawabs may have. At least, among the more progressive princely states, they probably realised the good value of education, health and so on and began to invest in that.
Can you give an example?
You can take the example of the Maharaja of Baroda, Sayajirao Gaekwad III. He ruled from 1875 to 1939. He had compulsory primary education, including that for girls. He put in place a number of socially progressive policies. That sort of legacy is still being reaped till today. That is one possible explanation and a suggestive idea.
The interview originally appeared on on December 19, 2012.
Vivek Kaul is a writer. He can be reached at [email protected]

How Cong ‘chamchagiri’ made Sonia India’s No 1 politician

Vivek Kaul
The closest English word for the desi word chamchagiri is sycophancy. But sycophancy doesn’t have the same depth as chamchagiri does. Sycophancy doesn’t make my tongue twirl in the same way as chamchagiri.
So let me take this opportunity to explain 
chamchagiri in some more detail through a song from the late Jaspal Bhatti’s superhit television serial Flop Show. For those who don’t know or don’t remember, each episode of the serial highlighted corruption from a different facet of life.
One particular episode dealt with the travails of a PhD candidate and his attempts to get a PhD. The PhD candidate (played brilliantly by Vivek Shaque who died a few years back in a plastic surgery gone wrong) carriers out various household chores including buying vegetables for his guide (played by Bhatti) in the hope of getting his PhD.
Towards the end of every episode 
Flop Show had a parody of a hit Hindi film song. This particular episode had a spoof of the song jo tumko ho pasand wohi baat kahenge, tum din ko agar raat kaho raat kahenge.
The lines of the parody were different and went like this:
Jo tumko ho pasand wohi baat kahenge,
beaker ko agar jar kaho to jar kahenge.
You can listen to the complete parody here)
This is the level of commitment required of a 
chamcha, something that the word sycophant simply does not convey.
Now before you start to wonder, dear reader, as to why have I gone into so much detail in trying to define or rather differentiate between 
chamchas and sycophants, allow me to explain.
It shouldn’t come as a surprise to you if I tell you that most Indian political parties are full of leaders who are essentially 
chamchas who have risen to the top or full of leaders who have become chamchas after being brought in at the top.
Some of the cadre based parties like the Left Parties and Bhartiya Janta Party (to some extent) are exceptions to this.
But India’s number one party when it comes to 
chamchas is the Congress. Most recently the chamchagiri was in full show when top leaders of the party like P Chidambaram, Veerapa Moily, Jayanthy Natarajan, Kapil Sibal, Manish Tewari and Rashid Alvi (all lawyers to boot) spoke out to vociferously defend the shenanigans of Robert Vadra, son-in-law of Sonia Gandhi, their supreme leader.
But Congress was not always a party of 
chamchas and chamchagiri. At least not till 1969. Historian and writer  Ramachandra Guha explains this in an essay titled A Short History of Congress Chamchagiri which is a part of his recently released book Patriots and Partisans.
Most Indians are too young to know this, but the truth is that until about 1969 the Congress was more or less a democratic party,” writes Guha.
Sometime before Jawahar Lal Nehru died, Indira Gandhi had been planning to settle in Great Britain. After Nehru died in May 1964, she was invited to join the cabinet as the minister of information and broadcasting by Lal Bahadur Shastri who took over as the next prime minister.
When Shastri died in January 1966, Mrs Gandhi was, to her own surprise, catapulted into the post of the prime minister. There were other and better candidates for the job, but the Congress bosses (notably K Kamraj) thought that they could more easily control a lady they thought to be a gungi gudiya (dumb doll),” writes Guha.
But instead of being a 
gungi gudia she turned out to be a control freak who split the party in 1969 and what was a essentially a decentralised and democratic party till that point of time became an extension of the whims, fancies and insecurities of a single individual.
Thus started an era of 
chamchas and chamchagiri in the Congress. Dev Kant Baruah who was the President of the Congress Party between 1975 and 1977 went to the extent of saying Indira is India and India is Indira“. What was loyalty to the party earlier became loyalty to the individual and the family.
Also Indira Gandhi had total control over the system effectively overriding democracy and imposing emergency on June 26, 1975.
famous cartoon made by Abu showed President Fakhruddin Ali Ahmed in his bath during the emergency signing ordinances and saying “if there are any more ordinances just ask them to wait.” Other than this, Indira Gandhi also took to firing both chief ministers and governments at will.
While she was building her own career, Mrs Gandhi’s two sons Sanjay and Rajiv were trying out their own careers as well. As Guha writes “The elder boy, Rajiv, after having followed his mother in having failed to complete a degree, took a pilot’s license and joined Indian Airlines. The younger boy, Sanjay, prudently chose not to go to university at all. He apprenticed at Rolls Royce(in Great Britain), where his lack of discipline provoked a flood of anguished correspondence between his mother and the Indian high commission.”
Sanjay Gandhi came back to India with the idea of manufacturing what he called the people’s car. “Despite the gift of cheap land (from a sycophantic chief minister of Haryana) and soft loans from public sector banks, the project failed to deliver on its promises. Another of Sanjay’s chamchas Khushwant Singh, then the editor of the 
Illustrated Weekly of India, claimed that his factory would roll out 50,000 cars a year,” writes Guha. But nothing of that sort happened.
Sanjay Gandhi got out of cars and gradually got into politics effectively becoming number two to his mother Indira. Rajiv Gandhi on the other hand wasn’t interested in politics. “His greatest professional  ambition was to graduate from flying Avros on the Delhi-Lucknow run to flying Boeings between Calcutta and Bombay. By June 1980 he had been flying for twelve years, but his record did not yet merit the promotion he so ardently desired,” Guha points out.
In June 1980 Sanjay Gandhi died in an plane crash and Rajiv had to enter politics to support his mother. And in politics he was luckier than he was as a pilot. As Guha writes “He was rather luckier in politics. Once he had answered Mummy’s call, and changed his career, the rewards were swift. Within five years of joining the Congress he had become prime minister of India.”
And the Congress party had effectively become a family run concern. As Guha writes in the essay 
Verdicts on Nehru “Mrs Gandhi converted the Indian National Congress into a family business. She first bought in her son Sanjay, and after his death, his brother Rajiv. In each case, it was made clear that the son would succeed Mrs Gandhi as head of Congress and head of government.”
Once Indira Gandhi had placed her family at the helm of the Congress it was time for other parties across the country to follow suit. “Indira Gandhi’s embrace of the dynastic principle for the Congress served as a ready model for other parties to emulate…The DMK was once the proud party of Dravidian nationalism and social reform; it is now the private property of M Karunanidhi and his children…Likewise, for all his professed commitment to Maharashtrian pride and Hindu nationalism Shiv Sena leader, Bal Thackeray could look no further than his son. The Samajwadi Party and Rashtriya Janta Dal claimed to stand for ‘social justice’, but the leadership of Mulayam’s party passed onto his son and in Lalu’s party to his wife,” writes Guha.
There are other examples as well. Sharad Pawar is grooming his daughter to take over the reins of his party. Dr Farooq Abdullah passed on the leadership of his family party the National Conference to his son Omar. And this is deeply inimical to the practise of democracy in India, feels Guha.
He gives the example of once travelling through Tamil Nadu a few years back. “I was met at every turn by ever-larger cut-outs of the chief minister’s son and heir apparent – cut-outs of MK Stalin smiling, Stalin writing, Staling speaking into a cell phone. The only other place where I have felt so stifled by a single face was in Syria of Bashar Assad.”
And all this has happened because Lal Bahadur Shashtri died rather suddenly and Indira Gandhi was catapulted into a position of immense power. So the question is what would have happened if the Shastri had lived for another five years?
“Had Shastri lived, Indira Gandhi may or may not have migrated to London. But even had she stayed in India, it is highly unlikely that she would have become prime minister. And it is certain that her son would have never have occupied or aspired to that office…Sanjay Gandhi and Rajiv Gandhi would almost certainly still be alive, and in private life. The former would be a (failed) entrepreneur, the latter a recently retired airline pilot with a passion for photography. Finally, had Shastri lived longer, Sonia Gandhi would still be a devoted and loving housewife, and Rahul Gandhi perhaps a middle-level manager in a private sector company,” writes Guha.
In short, the world that we live in would have been a very different and probably a better place. 
But as the great Mirza Ghalib, who had a couplet for almost every situation in life, once said “hui muddat ke ghalib mar gaya par yaad aata hai wo har ek baat par kehna ke yun hota to kya hota?
The article originally appeared on on November 27,2012.
(Vivek Kaul is a writer. He can be reached at [email protected]

What Karnad just found out: India is a nation of holy cows

Vivek Kaul
Two-thirds of the way through singing Kolaveri Di, Dhanush sings a few words which you notice if you are the kind who listens to the lyrics of songs very carefully. He sings “cow-cow holy cow, I want to hear now”.
These few words can be used to best describe the situation which prevails after Girish Karnad said “Tagore was a great poet but a mediocre and second-rate playwright.” Not surprisingly the Bengali bhadralok are up in arms.
There are five holy cows that the bhadralok have and it’s best that people stay away from criticising or critiquing them. Here is the list.
Mohun Bagan is the best football club: This is not much of a holy cow now but in the eighties and till the mid nineties any criticism of this football club could have got you lynched. Then came ESPN-Star Sports and Bengal realised that their football is a slow motion version of the real football played in Europe.
Rossogulla/Sondesh is the best sweet: This can lead to minor battles especially if you have a bong girl friend who loves her food. She will never come around to appreciating the pleasures of eating Mysore Pak. Another version of this debate is whether the Hilsa is the best mach i.e. fish in the world?
Sourav Ganguly is the best cricketer: I realised how strong this holy cow was when in the late nineties India was struggling to find a good wicket keeper and a Bengali colleague of my father suggested that “Sourav se wicket keeping kyon nahi karata hai?(why don’t we get Sourav to keep wickets?” In a land of few heroes Sourav could do no wrong.
Manika Da is the best director: Manik Da was the daak naam or nickname of the great Satyajit Ray. I have watched almost all of what Ray directed and watching his movies has been a brilliant experience. But Pather Panchali isn’t my favourite Ray movie (Now did I do a Karnad here?).
In fact I loved the sequels Aparjito and Apur Sansar much more. My favourite Ray movies are the ones he made in the seventies. The Calcutta trilogy of Pratidwandi (1970), Seemabaddha (1971) and Jana Aranya (1976), and Aranyer Din Ratri (1970) remain perennial favourites. And I can watch Shatranj ke Khiladi (1977) over and over again.
Ray was a rare director whose movies were much better than the books and stories he based them on. Anyone who has read Sunil Gangopadhyay’s Pratidwandi and Aranyer Din Ratri and watched Ray’s movies based on the books would realise that. The same is true for Sankar’s Seemabadha and Jana Aranya, and Prem Chand’s short story Shatranj ke Khiladi. Also I am not getting into the debate of whether Ray’s Charulata was better than the original novel written by Rabindranath Tagore.
Nevertheless, a lot of what Ray directed after Hirok Rajar Deshe in 1980 was very mediocre and nowhere near his best. But I wouldn’t recommend you say anything like that in and around Kolkata.
Rabindranath Tagore is the foremost intellectual: This is the holiest of holy cows for the Bengali bhadralok. Tagore cannot be criticised. Any criticism of Tagore, reasonable and unreasonable, is totally unwelcome. Girish Karnad is finding that out now. A stream of Bengali intellectuals and politicians have queued up to criticise Karnad. The basic argument is that what does Karnad know of Bengal? Even the criticism on Twitter and Facebook has been scathing. A struggling actor who happens to be a Bengali had this to say on his Facebook page “Karnad calls The tagore a second rate playwright!!coming from a mediocre actor and a boring playwright..I have said it..!moving on..”
Another interesting comment that I came across on my Facebook page was “Even Poonam Pandey and Sherlyn Chopra know how to seek attention. Girish Karnad would do better in taking a lesson from them.”
The backlash on Karnad’s comments raises several questions. Is any creative person above criticism? Even Tagore. Also Tagore was not a one dimensioned intellectual. He was a poet. A novelist. A playwright. A musician and even a painter. His interests were not limited to one particular domain. But that does not mean he was the best at all the things he did. And that’s precisely the point that Karnad was trying to make.
As he said “He was a great poet certainly, one of our greatest. And he got the Nobel Prize in 1913 when most of our modern literature was still in the state of formation. His greatness as a poet is there, his greatness as a thinker is there… he wrote plays, he certainly was a pioneer in breaking away from the unexciting commercial plays…he didn’t direct great plays. The point is he was a mediocre playwright.”
And Karnad does know a thing or two about writing plays having written several plays himself. He also won the Jnapith award in 1998, which is the highest literary award conferred in India.
Tagore was a great poet. But whether he was a great musician, painter or playwright remains debatable? And this debate or discussion one cannot have with the Bengali bhadralok. As George Soros’ Theory of Reflexivity states “People’s understanding is inherently imperfect because they are a part of reality and a part cannot fully comprehend the whole.”But why blame only the Bengalis. India as a nation is full of holy cows who cannot be critiqued. And here are some of the bigger holy cows whose criticism can get you into trouble.
Narendra Modi is the best leader:  There are three ways to get people to read things on the internet in India. Criticise the Congress party and the UPA. Praise Narendra Modi (or NaMo as his fans like to call him). And the third and the best way is to criticise NaMo. That will unleash a barrage of negative comments on the website, with a lot of them bordering on abuse. But yes the website will get a huge number of hits, something that it has never seen before. The broader point being that any criticism or even an objective evaluation of his persona is immediately run down. But there are chinks even in NaMo’s armour starting with an abandoned wife and the fact that he doesn’t really come across as a team man and likes operating on his own most of the time.
Mahatma Gandhi: The father of the nation was a great man. But he had his weaknesses. The Mahatma did not have a great family life. And his eldest son Harilal converted to Islam. His opinions on sex for a family man were slightly weird. As an article in The Independent points out “It was no secret that Mohandas Gandhi had an unusual sex life. He spoke constantly of sex and gave detailed, often provocative, instructions to his followers as to how to they might best observe chastity. And his views were not always popular; “abnormal and unnatural” was how the first Prime Minister of independent India, Jawaharlal Nehru, described Gandhi’s advice to newlyweds to stay celibate for the sake of their souls.”
But any discussion or debate which does not show Gandhi in positive light is likely to create trouble.
Jawahar Lal Nehru and his relationship with Edwina Mountbatten: As Ramachandra Guha wrote in The Hindua few years back “The Indian public in general, and the Indian press in particular, has shown a keen and perhaps excessive interest in the relationship between Jawaharlal Nehru and Edwina Mountbatten. That they were intimate is not to be doubted — but did the bonds ever move from the merely emotional to the tellingly physical?”
Universal Studios was supposed to make a movie on the relationship but they later shelved the project. As The Telegraph reported “The Indian government had given permission for the movie, Indian Summer, starring Cate Blanchett and Hugh Grant, to be filmed on location there but only if physically intimate scenes were removed.” This is another holy cow which cannot be questioned.
Shivaji Maharaj: In the state of Maharashtra any critique of the great king who fought the Moghuls like no one else did can get you into a lot of trouble. As James Laine who wrote the book Shivaji: Hindu King in Islamic India found out a few years back. Those who wanted the book banned felt that the book insulted Shivaji. Those who read the book felt that it was not a book about Shivaji but more a book about how Shivaji’s legacy has been hijacked by various castes and communities in Maharashtra to further their own ends.
Sachin Tendulkar is the best cricketer:  This for a very long time was even holier than the holy cow. Any criticism of the great man was likely to attract trouble irrespective of the fact whether you were in Mumbai or Muradabad. But things have changed over the years and people are more open to the God being criticised. Nevertheless, any criticism of Sachin can get you a lot of abuse, as I found out when I wrote this.
Islam: Any criticism of the religion can create major trouble as Salman Rushdie found out. Salman Rushdie’s The Satanic Verses was released on September 26, 1988 in the United Kingdom. Madhu Jain, a journalist working for India Today reviewed the book for the magazine. As she wrote in a recent column in the Openmagazine “It all began with my review of The Satanic Verses, published on 15th September 1988 in India Today­ (probably the first review of the novel.)…Unfortunately, the editor of the books pages of the magazine at the time, who later went on to edit a national daily, plucked some of the more volatile extracts from the novel—those about the Prophet’s wives—and inserted them into the book review. Not too long after the IFS bureaucrat-turned-politician Syed Shahabuddin read the excerpts (not the book as he admitted ) and demanded that The Satanic Versesbe banned. Protests erupted in India and Pakistan. In Karachi, a few protesters died when they were fired upon. It is believed that Ayatollah Khomeini watched this on television and ordered the fatwa.”
India became the first nation to ban the book on October 5, 1988, after Syed Shabbudin, a member of parliament, petitioned the government to ban the book. Rajiv Gandhi, the political novice that he was, banned the book immediately.  Khomeini of Iran issued a fatwa on Feb 14, 1989, Valentine’s Day.. Rushdie had to go into hiding after that and his been unwelcome in India since then. He had to pull out of the Jaipur Literature Festival last year.
MF Hussain: This is an interesting story. Hussain had to live a large part of his later life in exile given the large number of court cases pending against him in various parts of the country for hurting the sentiments of Hindus through his paintings. This included drawing several Hindu gods and goddesses in the nude. Those in his favour say that artists need to have their freedom of expression, which is true.
But let me reproduce a paragraph from a piece  that Shobhaa De wrote on him in The Times of India during his exile in Qatar. “Dressed in traditional Emirati gear, the painter is wearing socks , but no shoes. Mustafa, his handsome third son explains this is to respect local sensibilities regarding bare feet,” wrote De. Hussain had always walked bare foot but he was respecting the local sensibilities in Qatar and wearing socks. If he could respect local sensibilities in Qatar, couldn’t he do that in India as well? But any criticism of Hussain can get the so called intellectual class in Delhi and Mumbai ganging up against the person who dares to criticise Hussain.
The Gandhi family: During her peak any criticism of Indira Gandhi was unwelcome. Nayantara Sahgal, her first cousin, wrote a book Indira Gandhi: Tryst with Power, which was   very critical account of Indira’s tenure as India’s Prime Minister. The book written in 1982 was only released in India earlier this year. This trend has continued and any criticism of the Gandhi family is largely unwelcome. Arvind Kejriwal recently broke this trend by taking on Robert Vadra, Sonia Gandhi’s son-in-law headon.
Rajinikanth: Try criticising India’s highest paid actor anywhere south of the Vindhyas and see what happens. Manu Joseph the editor of Openwrote a column on the superstar in which he said “He has no talent, an unremarkable body, and has had no hair for much longer than we realise. When he puts his right elbow on his left palm and the left elbow on the right palm, he demands that everyone accepts it as dance. And his ability to toss a cigarette in the air and grab it with his mouth is attainable even to my mother. Have no doubts, even to Tamilians he looks grotesque in leather shirts and pants and previously unseen shoes. I have watched his films in the cheapest theatres in Madras and know exactly what happens when he makes his grand entry, boots first. The screams and whistles in the theatre are not the awe of respect, but an expression of love for a beloved clown. Nobody in those theatres knew why they were reacting in that manner to him.”
Almost all of what Joseph wrote is true but read the comments that followed his article to see how the people reacted to his critique of the star.
Ambedkar and reservation: BR Ambedkar and the reservation policy first initiated first by VP Singh and then carried forward by the United Progressive Alliance government is a bigger holy cow than even Rajinikanth. You might get away by critiquing Rajinikanth but expect no such mercy if you get around to criticising Ambedkar or the reservation policy.  Arun Shourie, wrote a book titled Worshipping False Gods in which he challenged. Ambedkar’s contribution to Indian Independence. As Shourie wrote “There is not one instance, not one single, solitary instance in which Ambedkar participated in any activity connected with that struggle to free the country. Quite the contrary–at every possible turn he opposed the campaigns of the National Movement, at every setback to the Movement he was among those cheering the failure.”
Of course this did not go down well with people. As Rediff reported “Some Congress MPs did, however, burn copies of the book outside Parliament House, and called for a ban.”
The Holy Cow: Yes. The holy cow is the ultimate holy cow in the country. And every few years close to the elections the issue is resurrected with demands to ban their slaughter. Ironically enough India is set to emerge as the largest exporter of beef in the world.
The moral of the story is that India as a country has too many holy cows that one cannot critique and criticise. We make heroes, we worship them but we never get around to analysing them. As the Channel V ad went in the good old days, we are like this only.
The article first appeared on on November 10, 2012.
(Vivek Kaul is a writer. He can be reached at [email protected])