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THE ECONOMIC TIMES

The Edit Page

THE ECONOMIC TIMES | MUMBAI | FRIDAY | 27 SEPTEMBER 2013

Let Zero Schemes Finance Growth, RBI

This transparency fetish serves little purpose
The RBI has done immense disservice to industrial growth in the short term by asking banks not to offer popular financing schemes for consumer durables dressed up as zero-interest equated monthly instalment (EMI) schemes. Industrial growth has been extremely weak for an extended period and the forthcoming festival season is an opportunity for assorted consumer durable companies to step up their sales. The zero-down-payment, zeroprocessing-fee, zero-interest EMI schemes an increasing number of companies offer on a variety of products are good for both consumers and for companies. The RBIs move scuppers this opportunity to a large extent. It is not the case that consumers are unaware that these financing schemes entail real costs on account of interest and documentation. They are aware that credit cardissuing banks charge a financing cost that product companies bear, to tempt consumers with zero offers. But this is not their concern. Nor should it be the RBIs. If the RBI is worried about the rates banks offer, it is welcome to examine the banks books and ascertain if any rule is being violated. Why should the bank regulator interfere with the behavioural economics at work when consumers prefer zero finance options on a higher price that bundles financing cost with the product price to the transparency of a lower product price and an explicit overlay of financing cost? Nor are consumers irrational. The cost would be lower, when borne by the company for multiple transactions all together, than when financing is offered to individual consumers. The only beneficiary from the RBIs move is the buyer with sufficient purchasing power to not need a financing scheme, now that the product would be priced lower, taking out the financing cost by which price had been marked up earlier. Product sales and industrial growth would suffer, for the benefit of a tiny elite. This is a fetish for transparency that benefits no one except bean counters at the RBI. The RBI should withdraw these strictures gracefully and wish the economy a Happy Diwali.

There are several reasons for low job growth and one of them could be hugely empowering

Spiritual Atheist

School for Revolution

Abheek Barman
s elections approach and the campaign gets shriller, the UPA and opposition parties are in the market for talking points to pin each other down. The BJP gloats that it created more jobs in its five years than UPA-I managed to create between 2004 and 2009. This is correct: between 1999-2000 and 2004-05 when the BJP was in power, the total number of jobs went up by a little more than 60 million. Between 2004-05 and 2009-10, the rise was a paltry 2.76 million. The difference looks dramatic, but some of the drama is based on a statistical error. Since nobody has the time and technology to go around and ask 1.2 billion Indians what they do for a living, economy-wide job numbers are compiled after sampling a fairly large number of people around 4,57,000 and then projecting what they do for the entire population. Population numbers are measured by the censuses, where every Indian is counted. Unfortunately , the censuses take place once every 10 years. So, we know what Indias population was in 2001 and what it was in 2011, two census years. But between 2001 and 2011, the government took what it thought is the average population growth rate and added that to the next year, to get an approximation of the population. Well, those estimates of the population were

Lunch at Tiffinys
VITHAL C NADKARNI

wrong by a biggish amount. Indias population in 2011 was underestimated by a little more than 18 million. Thats a bit more than all the folks in the Netherlands. The lower the population numbers, the lower will be the number of jobs projected on to it. On July 27, Abhishek Shaw showed in The Economic and Political Weekly (EPW) that with correct population numbers, the 2009-10 job numbers would actually go up by more than four million. The UPA-I, therefore, added around seven million jobs in its tenure, not the less-than-three-million number estimated earlier. The pace of job creation has since picked up: in 2011-12, more than nine million new jobs were added.

ARINDAM

Office Chair to School Bench

Away from banal TV debates, the question is whats causing the slowdown in the job market? Numbers show an interesting thing: over time, more and more Indians especially women are opting out of jobs. Is this the result of discrimination, or is it because more and more girls, who would otherwise have started working, are opting to study , instead? Writing in the EPW on August 3, economist Vinoj Abraham found that it was a bit of both. With all the women streaming in and out of offices and data centres, youd imagine that the proportion of urban working women would have shot up in the last 40 years. But, no, Abraham finds that in cities, the proportion of working women has actually fallen, from a little more than 14% in 1972-73 to a little more than 13% in 2011-12. But the real drama is in our villages, where the proportion of women at work has shrunk from 32% to 18% in the same time, a near-halving. Why? He finds that as rural incomes increase, women are taken out of the workforce. In families that are landless or have tiny slivers of land, between 40% and 19% of women work. Only 3.3% of women work in families that have more than 4 hectares of land. So, the richer you are, the better you can afford the prejudices of caste and patriarchy that frown on working women. But there is a hugely positive story too, one for which the Congress can claim all credit. Today , thanks to efforts like the Sarva Shiksha Abhiyaan and the Anganwadi system, more and more girls in our villages are going to school and opting to study longer years. That year, 85% of village girls aged 5 to 15 went to primary school, 35% went to high school, and more than 4% of girls between 21-25 years of age continued with higher studies.

Writing on the Blackboard

This is an amazing achievement, one that India can boast of to the rest of the world, but that, strangely , has slipped below the radar of public discourse. Thats not all. Abrahams study shows that this near-universal education for village girls cuts across all income groups. In 1983, 38% of the girls from the wealthiest families and only 9.2% of the poorest families went to primary school. In 2009-10, more than 63% of better-off village girls were in school. And even from families that were the poorest tenth of the village population, a staggering 52% of girls were in primary school. Much of this must have been made possible by the floor under rural wages that the NREGA helped to set. Today , I cant wait for the momentous social, economic and institutional changes that this bunch of educated young ladies will force on India in the next years and decades.

S for Study
In 1983, around 29% of village girls between 5 and 15 years old were in school. By the time they turned 16, this dropped dramatically to 4%. Only 0.6% of village women continued into colleges and higher studies between the age of 21 and 25. By 2009-10, the beginning of the UPAs second term in office, these numbers had changed dramatically for the better.

Today, thanks to the Sarva Shiksha Abhiyaan and the Anganwadi system, more girls in our villages are going to school and opting to study longer years

Pay Babus Well but Make them Work

The governments move to set up a Seventh Pay Commission for central government employees will cheer the hearts of eight million civil servants and pensioners. The report will be implemented in 2016, and thats well-timed as it will not lead to bunching of arrear payments and distort the fisc. But the commission must work out not just the pay revision, but link it to promoting efficiency and productivity . The vast majority on the governments rolls are low-skilled employees, waiting to be made redundant by the march of technology . Retraining them in areas that face an acute staff shortage is a good idea. The commission should look at structural reorganisation, including a leaner bureaucracy at the higher levels, liberal lateral entry and market-referenced salaries. It makes sense to restrict the number of posts, joint secretarys and higher, rather than create more posts to promote every junior officer who gets on in years. In the army , promotion does not depend on seniority alone, merit and availability of posts kick in. So many retire not rising above colonel. It should be the same in the civil service. Promotion based solely on performance-based evaluation, and not on seniority , will foster efficiency and an incentive to deliver. Civil servants who do not make the cut should be allowed to retire early with the benefits of a full pension. It could also give them the chance of a second innings outside government. Right now, there is no incentive for good performance and no penalty for non-performance. This must change. The Seventh Pay Commission should, again, propose policy of no transfers before full expiry of the normal term except on grounds to be approved and recorded by an apex committee and moving from periodic pay commissions to a permanent one. And the government of the day should act on them.

Advertising: Going Digital?

Global ad spends will cross $517 billion in 2013, up a mere 2.8% from 2012 levels, says eMarketer. While the west dominates ad revenue share, emerging markets are clocking higher growth rates
Total Media Ad Spend Per Person* ($) Digital Ad Spend Per Internet User** ($)
Australia UK Norway US Denmark Canada Sweden Netherlands

Blinkers Off

Salam

Call it artistic licence or fatally-flawed premise, The Lunchbox has given us an unlikely villain: the rogue dabbawala! He nevertheless fosters a MarchDecember romance with his mindless switch of lunch pails. Now, you might ask why a Godfearing-bhajan-singing dabbawala would make the same mistake more than once. Doesnt that oft-repeated mistake then become a conscious decision, as the anonymous wag said? To make that seem probable, one looks upon the dabbawala as Cupid in disguise. For, if we dont put wings and haloes on these poor chaps in Gandhi caps, they are stuck with an image problem: by a conservative estimate, the chances of a wrong delivery are as low as one in eight million! So, the chances of the wrong dabba going to the same wrong address day after day ought to be virtually zero. This is the province of artistic licence: anything can happen in reel life, especially things that dont normally happen in real life. The fact that the same mistake gets repeated over and over again with only mouthwatering change of menus also suggests that this is a cosmic coincidence. By stuffing himself up with stuffed bitter gourd made by a stranger, the deadpan Bandra boy opens a veritable Pandoras box. In its mythic connotation, Pandoras box supposedly contained all the evils of the world. But in our spiritually atheistic/sceptical times, the phrase merely means to perform an action seemingly small, innocent and insignificant, but that nonetheless leads to large, farreaching consequences, such as finding love in lifes twilight. Salute that!

Letters

God often gives nuts to toothless people.

Matt Groening Creator of The Simpsons

Norway 582 US 540 Australia 535 Sweden 404 Canada 397 Denmark 393 UK 347 Finland 328 Japan 320 Germany 319 Worldwide 73

209 201 191 174 163 119 118 104 97 91 46

India***

Can you Stop the Blaming?

This refers to Why Army Rule Fails (ET, Sep 25). A soldier is not an automaton who jumps in front of a bullet on command, but a human being. Yes, were happy to live in a democracy and not a dictatorship, but to suggest otherwise is to do disservice to the millions of men whove served the nation in uniform. The article proposes this to be the case. Unlike a lot of people working the economy , out of narrow selfinterest, the army looks after the interests of all its personnel and guards the nation.
PARVEEN CHHIBBER Bhopal

India***

$4.5

Germany Japan Worldwide

$2.67
Yes, youre my conscience keeper Why have you started working overtime these days?

Digital advertising will drive higher ad spends worldwide, and will remain the fastest-growing category between now and 2017

*Includes digital, print, directories, outdoor, radio and TV; **Includes advertising on PCs and mobile devices; excludes SMS, MMS and P2P advertising ***Based on Ficci-KPMG Media and Entertainment report, 2013; $1 = `60

SOCIAL STRIFE

Citings

Why India Inc should Care About Muzaffarnagar

Sambuddha Mitra Mustafi
enterprise: trust in each other as market participants, in the fairness of the law and in the states monopoly over violence. Trust and negation of violence were running themes in the moral philosophy of Adam Smith, the founding father of modern capitalism. [A market society] cannot subsist among those who are at all times ready to hurt and injure one another, wrote Smith in The Theory of Moral Sentiments (1759), the moment that injury begins, the moment that mutual resentment and animosity take place, all the bands of it are broke asunder. In Smiths view, when trust is shaken, individuals pull out in fear and the system contracts. In a developing society like India, trust is made fragile by a corrupt state and the citizens competition for scarce resources. Political demagogues use our human frailties to sow further mistrust, in order to capture and abuse state power: Indira Gandhi used the elites mistrust of the poor to impose the Emergency; the BJP and Samajwadi Party have used sectarian mistrust to their own political ends in the Muzaffarnagar riots. In both cases, the silence of Indian corporates was conspicuous: the lure of a strong leader during an economic downturn bought their silence. It is somewhat natural in a country that is still struggling to come out of its statist past business leaders get easily co-opted by charismatic politicians rather than speak their mind. The strong leader fetish also betrays India Incs lack of self-confidence to develop a diverse society into a prosperous market. But companies will be big losers if they meekly allow politicians to sow sectarian mistrust and violence. The decade after the 2002 Gujarat riots was the most peaceful in independent India in terms of sectarian violence. Not surprisingly , it was also the most prosperous. But now, India is seemingly falling victim to what some China experts call the 5% rule: that social tensions will rise if GDP growth falls below 5%. In India, growth has already fallen below 5%, and sectarian strife has cropped up in Assam, J&K and Uttar Pradesh in the last year. Yes, election season has triggered the latest riots, but the groundwork was laid by increased competition over a shrinking economic pie. In that way , the current conditions are similar to the 1990s. But Muzaffarnagar broke the pattern of largely urban riots in India this happened in villages. Its a sign that economic activity and competition among rural communities has increased over the last few years. This can cut two ways; in a peaceful environment, Muzaffarnagar can join the next high-growth frontier of the Indian economy . On the other hand, if divisive politicians have their way , it can become the hateful hinterland, a terrorism incubator. Either way , India Inc can ignore Muzaffarnagar at its own peril.
The writer is Fulbright scholar and a freelance journalist

On Policy Design
RICHARD THALER

Netas of a Bad Brotherhood

It is a sad moment for our democracy when the Union Cabinet clears an Ordinance to neutralise the Supreme Courts order mandating immediate disqualification of MPs and MLAs convicted for offences carrying a sentence of two years or more. This is a case of mockery of democracy and justice. All politicians have joined hands claiming the SC does not have the power to frame laws and regulate elections. Are the politicians trying to suggest that convicted legislators are entitled to participate in the exercise of formulating laws? How can lawbreakers make the law? Our electoral laws are defective and must be amended.
MAHESH KAPASI New Delhi

Philosophy continues to be a grim, quarrelsome, life-and-death affair

Kant, Cant and the Non-Lethal Gun

Philosophers are often called people who are famous without most people knowing just what they are famous for. Take the case of Immanuel Kant. This 18th-century German thinker continues to provide gray hairs to students. What, after all, can you say about a man who himself called his famous The Critique of Pure Reason dry , obscure and prolix. Obviously , making sense of it might be tough. But that sort of frustration doesnt just affect hair. It can lead to physical attacks. Witness the recent incident in a Russian city where two young men, out to buy some beer, started talking about Kant. Things, predictably , got a bit convoluted. Which situation one of the men apparently attempted to bring to a speedy resolution by way of taking out a gun and shooting the other. Kant should be happy . This proves something called the subject-object problem, though in somewhat modified form. The shooting itself, well, could be termed a categorical imperative. One isnt sure, though, what Kant would have made of the fact that the gun in question was non-lethal, a sort of rubber-bullet one. But, overall, one agrees with the gentleman who, legend has it, returned a manuscript of The Critique Kant had sent him saying he was sure hed go mad if he read it to the end. Investigations must focus on whether the shooter had done so.

If India is pockets of California in the middle of sub-Saharan Africa, as Amartya Sen puts it, then Muzaffarnagar is decidedly the latter. And, like machete-wielding sub-Saharan tribes, Hindu and Muslim mobs looted and killed each other in a politically engineered riot that left nearly 50 dead and 40,000 displaced earlier this month. This was a riot foretold: analysts had warned that the BJP and Samajwadi Party were colluding to polarise votes, extrapolating from their success in the early 1990s. In the absence of outrage from Indias Californians, the political players retain the incentive to further divide voters, making this one of Indias most violent elections ever, and completely wrecking the investment climate in the country . This is not alarmist: the dangers arising out of Muzaffarnagar are real and much closer than we think. Heres why . First, history shows us that Indias financial capital suffers the major aftershock of sectarian violence in Uttar Pradesh. The Mumbai stock exchange was the main target of Muslim extremists in 1993, after the Babri Masjid demolition and the ensuing riots in the city . It takes only a handful of riot survivors to turn radical and seek revenge against a country that let them down. Very likely , they would choose a high-profile, urban target. Even if we avoid this dire scenario, the breakdown of trust between communities, as we see in Uttar Pradesh, has a deeply negative impact on business. Trust is the foundation of free

A choice architect has the responsibility for organising the context in which people make decisions. If you design the ballot voters use to choose candidates, youre a choice architect. If youre a doctor and must describe the alternative treatments to a patient, youre a choice architect. If youre a parent, describing possible educational options to your son or daughter, youre a choice architect. If youre a salesperson, youre a choice architect The libertarian aspect of our strategies lies in the straightforward insistence that, in general, people should be free to do what they like and to opt out of undesirable arrangements if they want to do so When we use the term libertarian to modify the word paternalism, we simply mean liberty-preserving. Libertarian paternalists want to make it easy for people to go their own way; they do not want to burden those who want to exercise their freedom. The paternalistic aspect lies in the claim that it is legitimate for choice architects to try to influence peoples behaviour in order to make their lives longer, healthier and better. In other words, we argue for self-conscious efforts, by institutions in the private sector and by government, to steer peoples choices in directions that will improve their lives. In our understanding, a policy is paternalistic if it tries to influence choices in a way that will make choosers better off, as judged by themselves.
From Nudge: Improving Decisions About Health, Wealth and Happiness

Just a Useless Pack of Cards

This refers to Dont Deny Benefits to Those Without Aadhaar: SC to Govt (ET, Sep 24). I went and gave my fingerprints and completed all the formalities for this card, which, of course, I am yet to receive. But it was just political dadagari to compel me to get myself one more useless card. I already have an Election Card, Senior Citizen Card, PAN card, and now, to add to the collection, one more card that still leaves me niraadhaar. I also have a liquor permit card (with my mugshot) that no one cares to see when I buy the stuff.
BEHRAM AGA By email