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Tech dollars: A slow trickle to the
bottom |
The
most defining feature of the past two decades has been the emergence
of information technology networks. Unlike in the pre-internet
era, physical boundaries of nations have no meaning. Fat pipes
of optic fibre have allowed work to be shipped from developed-hence,
higher wage-countries such as the US to low-income countries such
as India. That has allowed a handful of Indian cities including
Bangalore, Delhi, Mumbai, Chennai, Hyderabad and Pune to become
a part of the virtual global economy. With the result, there are
several interesting, and alarming, changes taking place in the
city economy. For one, some of them-Bangalore, for instance-do
more business with cities outside the country than they do with
those inside. That's the good part. The bad part: The cities are
becoming neither equally nor equitably prosperous. Wages of the
knowledge workers are soaring and will tend to creep up closer
to those of the workers they have displaced abroad, before the
market corrects itself. In contrast, lives of the people engaged
in the informal economy are not improving at the same rate. That,
then, is the biggest challenge our cities face.
To be sure, inequalities in cities have always
existed. When the Industrial Revolution first turned cities into
what they are-engines of their economies-there were always the
rich industrialists and the poor workers. The rich lived in the
centre of the city, while the poor lived on the fringes, in squalid
conditions. Labour reforms and worker unions have since managed
to get a better deal for the organised worker, but the worker
in the informal economy still lives hand-to-mouth, with no medical
or pension benefits. And in cities such as Mumbai and Delhi, nearly
half of the workers earn their living as hawkers, road-side vendors,
or mechanics.
The cities cannot afford to let the divide
worsen. The social implications are far too grave to turn a blind
eye to it. City development, therefore, must be holistic. It's
fine to say that municipalities should introduce realistic user
charges, but when that means millions of poor will have no access
to piped water, one needs to rethink the conventional economic
wisdom. Similarly, while removing slums may be necessary for planned
development, the relocation should be taken up as an opportunity
to improve the living conditions of the dislocated. The municipalities
need to do something else: They need to become more efficient.
At present, revenue collections (largely property tax) at the
big Indian cities is way below the potential. Most cities can
simply double or treble their income by reforming and updating
their governance systems. They can then plough this money into
infrastructure that is accessible to all. Then, the virtual cities
would have become virtuous cities.
Populist Ploy
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Pay time: Talent, only talent,
should count |
The
government's ritual of appointing a pay commission every decade
to revise the compensation packages for its employees is turning
out to be an exercise in populism. And there is no reason to believe
that the recently constituted Sixth Pay Commission will be any
different.
Consider. The Centre decided against swallowing
the bitter medicine suggested by the Fifth Pay Commission-paring
employee strength by 30 per cent over a decade. It, however, increased
its salary bill by around Rs 17,000 crore. The central and state
governments are still contending with this act of fiscal profligacy.
Furthermore, this move has fattened those already earning more
than what they deserve-the lower rung of the government departments,
including those interfacing with the public. Meanwhile, the lot
that shapes government policies, negotiates the industry's interests
in global trade agreements, or oversees tax compliance is ill-compensated.
This is the larger danger. For example, the competitiveness of
Indian industry can be frittered away at the hands of incompetent
bureaucrats who are not versed in the intricacies of world trade.
Similarly, improving the tax-GDP ratio requires officials endowed
with special skills; else the government will find it difficult
to cut taxes and ensure higher revenues and greater compliance.
Reforms in the country have led to lesser
regulation in sectors where competition is adequate. To that extent,
government intervention has reduced. However, in sectors where
this has not happened, regulatory risk (read regulators) has replaced
government risk. These regulators, unfortunately, are staffed
by retired bureaucrats, either because the salary is capped to
that earned by the seniormost bureaucrats in the department, the
secretary, or because the selection committee has a bias for its
own kind. In the larger picture, what finally cuts is talent,
and the ability to attract it; issues like manpower count far
less (the percentage of government employees to the total population
in India is far less than that in some of the developed countries).
Thus, fears of a bloated bureaucracy are less worrisome than that
of perpetuating an inefficient one.
There is another fundamental flaw in the
government's approach to compensating its employees. It divorces
compensation from both the work profile and the skills required
for the job. In effect, lateral entry from the private sector,
something that could improve the quality of governance, is near
absent. The new pay commission, then, would do well to intelligently
devise compensation structures that attract talent and are performance
oriented.
Go Straight To The People
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Singur farmers: Red and
reformed |
One
has to hand it to the Marxists; they don't do things by halves.
They embarked on land reforms three decades ago when other, mostly
Congress-ruled, states were paying only lip service to it and
sealed their grip on power in West Bengal. Now, when the central
government and many states are scratching their heads over how
to package and sell economic reforms to the electorate, the West
Bengal government has, unexpectedly, come up with what looks like
a winning formula-instead of a top down only approach, it has
opted for a judicious mix of top-down and bottom-up strategy.
Resistance to change is inherent in the opposition to reforms.
No elite anywhere in the world has ever given up its privileges
without a fight. So, when the West Bengal government announced
ambitious plans of acquiring agricultural land for setting up
industries, the decision was met with howls of protests from affected
farmers and their political backers. Chief Minister Buddhadeb
Bhattacharjee's ambitious Reforms 2.0 was threatening precisely
those sections that had benefited most from the Left Front's Reforms
1.0 AKA Operation Barga (under which hundreds of thousands of
acres of vested land had been distributed to landless agricultural
labourers and marginal farmers).
Instead of treating the simmering discontent
as a law and order problem, the West Bengal government co-opted
the CPI(M)'s formidable grassroots network into the scheme. The
block-level administration would play only an enabling role; the
crucial task of convincing farmers to part with their land was
left to influential local party leaders. Result: farmers in Singur,
where the Tatas are planning to set up their Rs 1 lakh car factory,
have already offered 500 acres of land for acquisition. Yes, pockets
of resistance-mostly from unregistered share croppers and those
who don't have clear title deeds-remain and Opposition leaders
are fanning these flames (see The Battle For Land, Page 156),
but given the CPI(M)'s stranglehold over the grassroots in the
state, it does seem likely that the Bhattacharjee administration
will succeed in pushing its agenda through.
There's an important lesson in this for Messrs
Singh, Chidambaram, Ahluwalia and company. Bhattacharjee has won
support for his vision by going over the heads of power brokers
and vested interests and marketing his plans directly to the people.
It may be good idea if the central and state governments stopped
talking to Bhattacharjee's party colleagues in Delhi and sold
their ideas straight to the people.
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