Tuesday, 17 March 2015

Make In India - A Critique

Make in India is the flavour of the season, almost - with Media going overboard on its prospects, and waxing eloquent on the benefits it holds for India. Lost in all this panjandrum are the voices - some small, like mine, and others highly influential, who have been raising questions {not objections} on this entire affair. Let us look at some hard facts, conclusive facts that can drill a hole through this initiative, or at least raise some serious questions. 

1) India is a primarily agricultural economy with employment in agriculture being at around 57% 

2) The total number of dependants on agriculture can easily be around 500-700 Million people, perhaps more 

3) Data supports the above : let us look at just one data point - number of land holding in agriculture. There are 121 Million individual land holdings in India. If you assume one family per holding, you are straightaway staring at a figure of around 500 Million. Add landless labour and support services, and you have a humongous number. 

4) Another proof can be had by taking a look at Census Data; more than 75% of the population stays in Rural India. The population of the top 200 Urban agglomerations do not exceed 20%. It was 15.4% as pre census 2011, and 14.4% if you take out the agglomerations and list only the cities. That is the reality. 

5) The Indian Economic structure is not a large-company structure; Corporate India - towards whom this plan is pointed - contributes less than 20% {I think it is less than 19% even} of national income. Ditto on any other parameter you may care to check up on. 

6) Another proof is the data on employment, which also shows a skewness towards unincorporated and unregistered employments, as also data on Rural-Urban split of employment 

7) Consumption data is another interesting data point, with the consumption of the bottom layers of economy having grown by around 1% since 1978, and by 3% in the top layers of the economy, thereby proving that increased economic activity does not lead to riches for all. We do not have consumption trends of consumables, unfortunately - so we have no way of knowing the relative speads of this increased consumption 

India isnt just about Corporate India, which is a rather insignificant contributor to any economic number you may care to anaylse; and there is a strong possibility that Make In India might not directly benefit the people who need change the most - the rural population, whose needs and challenges are not the same as those of Urban India; the same can be said of the economically deprived segments of our society.

In order that the potential of the bottom 80% of the population is unlocked, and the impact of growth is felt across all sectors and income-levels in a more equitable distribution, some basic steps are vital. In fact, it may even be possible that the absence of these steps might actually stall the entire MII initiative, and ground it fully and finally. I havent seen any indication from the GoI that it intends to do these; if it is in the works, excellent. If not, we are still hurtling form one crisis to the next. 

1) Agriculture ; Data again clearly show that nearly 93 Million of the 121 Million holdings are losing money on every crop {NSS - 2005; am not aware of any survey conducted after this}. This indicates that earning for the farming community have to improve; which means that the entire ecosystem needs looking at : viz subsidy structure and outlay, inputs, market access, price controls, APMC, price realisation at farm level, education of farmers in latest techniques, spread of knowledge from ICAR and other research places to farmers, etc. Not one point from these is being talked about. 

2) Unless the farmers and those dependent on agriculture earn real money, there is zero chance that they will educate their children beyond the basics - and even that is doubtful. Literacy does not mean education - and economic growth requires education, not literacy 

3) Rampant Health Problems in rural India; economic growth means health is a prerequisite. And we as an economy spend among lowest on health worldwide. Fact. 

4) Education{1} - IITs and IIMs are not required, where the focus currently lies - and quite a few of these people run away from India, and that leaves out scores of colleges that require upgradation. Why should we focus on building capabilities that enable those who dont want to call India their home encash and leave, forgetting their mother? Not all leave, I admit - but then again, we do not require more IITs and IIMs for internal candidates - it is far better to upgrade existing infrastructure that will benefit not the select few but the large majority! That is the need of the hour!

5) Education{2} - For the mid and lower level colleges to perform better - another input is the quality of incoming students; improving their education levels requires investment in primary and secondary education. This isnt happening - GoI is not spending on these 

6) Education{3} - Participative growth requires education that enables people to take advantage of the opportunities. This will not happen under the current MII plan, that is a foregone conclusion 

7) Education{4} - Education is a state subject, or a subject in the concurrent list, What initiatives are being taken by the states? What pressure is there on them to improve, to ensure proper education and implementation? 

Ditto Agriculture - with focus being on freebies and irrelevant matters like GM Crops which will have no impact whatsoever. Ditto health. It is one thing to give them money - which is excellent; quite another to ensure its proper utilisation. RBI report on states budgetary health 2013-14 categorically lists the improvements as well as shortcomings of the states of India, as I stated in an earlier article. Please google and read.

It is indeed a laudable objective that GoI has undertaken - MII; but the question remains, is the timing right? Can it be postponed will we have the right infrastructure and mechanisms in place? Of course it can; these years can be far better utilised in building strength and capabilities across the board rather than undertake a high-risk venture like MII. 

An initiative like MII requires a few basics to be in place for it to be successful and implemented smoothly without which, delays are inevitable, as also massive cost overruns as businesses find a lack of requisite resources playing spoilsport. Some, like a digital backbone, can be implemented side-by-side {see data at the end}; others cannot. These others are matters related to people parameters like health and education. 

1) Factories require workers, Where will you get them? If you get them only from Urban or Semi Urban India, the time taken for the percolation to reach rural India will ignite resistance as the perceived gap between Rural and Urban India increases. The objective is to make all India a wealthy nation - not just Urban India. Does rural India have the ability as of now? I do not think so. As I stated above, there is a massive difference between literacy and education. We need education, not literacy.

2) They require Land. Where will you get land? Create draconian laws that ignore the interests of farmers? You do that - and you are guaranteed failure. We are a democracy, and have an excellent judicial system. The only result of ignoring the land-owners interests will be court proceedings, resulting in stalling of the entire MII initiative fully and finally. Irrefutable historical evidence exists of this. There is no option but what the UPA did- approval of 70% {pecentage negotiable as per me; point is community interests need taking care of} of the community who stand to lose. 

Urban India has no conceptualisation of Rural India; MII only stands to benefit the Urban population, not the interiors. And the result of a skewed growth will be another crisis as Urban India will not find the resources to fuel their growth as they go into hinterland, leading to a massive crisis of gargantuan proportions, given Corporate India's idiotic penchant of investing without proper analysis and on half-hearted reports created by people living in secluded AC environs of Metros, from excel sheets and data inputs which are highly suspect for their content and accuracy. 

That leads me to the most vital set of reforms - proper data collection, and statistical analyses; and digitisation of everything - which includes digitisation of land records, economic activity, data collection authentication and analysis, everything. Please remember that Millions of our enterprises are unregistered, and Millions more do not reveal the full story. For a proper reasoned analysis - data is vital; and unless captured properly and completely, surprises will arise that will cause hiccups, delays and wrong turns.

There will be tax and legal repercussions that will need to be thought through - which is relatively simple; It will also require taking various vested interests on board, which is exceptionally hard, and the only real challenge; vested interests who will see no benefit in lieu of losses in various ways - not without the concurrent reforms in the comments above. The result? More delays. 

On the dream of digital India etc, please take a look at the reality in a national perspective. Coverage alone will suffice, we need not go into the aspect of quality of coverage, which is a subject unto itself. Data Points in the coverage do not support the contention of most people that India is a digital nation. And data is sufficiently important a factor for it to merit an independent analysis, given that we are in the information age. The reality is starkly exposed by data :

Average Data Usage Per Customer Per Month on GSM : 62.16 MB; CDMA : 192.99; Avg Tot : 70.10

Broadband : 68 Million; Narrowband : 190 Million subscribers approximately

Data Arpu, while it is growing, is still in the doldrums; the average Indian consumer consumes less than 500MB as per this news article - a figure that is corroborated by the TRAI report.

The figures above are again borne out in this report : http://www.trai.gov.in/WriteReadData/WhatsNew/Documents/PR-TSD-80-05122014.pdf, which clearly states on page 12 that the number of user in India on 31st October accessing speeds of greater than 512kbps is 75.73 Million, including 60.61 Million from mobile devices.

We are a nation of 1.27 Billion! Penetration is abysmal; can we afford to wait till penetration rises? Will it rise in the absence of other reforms - or will it hit a glass ceiling? The data clearly states that only a small insignificant segment of our population stands to benefit from the data revolution as of now; things are changing fast - but this is where it stands today. This goes hand-in-hand with income - for the people in the bottom income levels to gain, they should be educated, and earning enough to have access to the services. 

We do not, as per me, have the proper ecosystem to sustain such an initiative; at least not one that can ensure fast devolution of benefits to the lower income segments. We run the risk of increasing the income differential. Furthermore, MII requires an ecosystem conducive to it, not rhetoric.Is it rhetoric? Or is it real? We dont have enough data to make a definitive conclusion of that as yet. But the indicators are worrisome. Let us see.

No comments:

Post a Comment