Public Policy SIGIIM Ahmedabad

Volume 1, Issue 3

Kautilya
Should the voters be given the right to recall the elected representatives? (Submission for Vidheyak, IIM B) 60% of sitting MPs in 2009 state elections for UP lost. In last three decades, no government in Punjab has been able to retain power.
Against this backdrop, it can be concluded that voters in India have been, at times, disillusioned with the government in power. However, no amount of discontent and public anger towards an elected representative can terminate his tenure. Right to Recall, at least in principle, would be a useful tool to address these concerns. However, implementing the principle entails addressing of several crucial issues. The planning at the policy level requires long-term vision. If granted, the right would encourage pursuing short-term gains even at the cost of long-term harm to avoid Recall. This would eventually be harmful for the voters. The principle also assumes rationality in decisions made by the voters. However, in the current context, there have been several instances where the public sentiment is affected by media. Trial-by-media could result in public opinion being swayed against a representative without an appropriate reason. Finally, implementing the Right to Recall would need substantial expenditure. Elections/ Referendums would be required at regular intervals which are costly affairs.

Inside this issue

Should Voters be given Right to Recall...1 Should informal sector be formalized...1 Is being a woman enough to represent women?....................2 Should RTI be extended to private sector?..............................2
(submissions for Vidheyak, IIM -B)

Should informal sector in India be formalized? (Submission for Vidheyak, IIM B)

Formalizing the informal sector rests upon the argument of the potential for more revenues. However, while informal sector does not generate the revenues for the government, it does provide livelihood and sustenance means to a major proportion of our population. Formalizing the sector would imply several of small enterprises would go out of business due to cost of compliance involved. This would directly affect millions of unemployed population of the country who would lose the means to survival. Moreover, the public distribution system in India has not made suitable inroads in the rural sector. This informal sector caters well to the demand of rural population. Keeping them under the gambit of taxation and other regulations could increase the demand-supply gap. However, this unregulated sector is mired in problems like exploitation of labor, child labor etc. No regulations and monitory mechanism implies that there are no checks on these illegal practices. Quality control also becomes an issue. Manufacturing of food products in informal sector is a potential health hazard. Additionally, products like plastic toys have been occasionally known to be of poisonous nature. Stricter checks should be imposed on such sectors.

All forms of Government Welfare should be abolished. ....3

(submission to V-Govern, IMT-G)

Democracy and Responsible media..4

(by Hemant Yadav)

Legalizing Giving-bribe.5
(submission to Vidheyak, IIM B) Recommendations to DoT for Draft Telecom Policy...5
(based on a session led by Prof. Rekha Jain)

FDI in Retail..6
(by Dr. Anil Kumar D.C.)

Chakravyuh-2011..7
(our flagship event at Confluence-2011)

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Women Reservation Bill: Is being a woman enough to represent women?

Belonging to a particular gender is NOT a sufficient qualifier for representing that gender. However given that most policies are designed considering the next elections

Should Right to Information Act be extended to bring private sector within its ambit?
The RTI Act enforces transparency in public institutions and on public servants that use public taxes and are intended to serve the general public. An Indian citizen can

and women constitute a chunk of the vote-bank with a weaker voice, more pro-women laws are likely to be passed if there are independent-thinking women in the decision making positions. Studies have shown that women are less inclined to indulge in corruption thus making policy implementation more effective. While more women representation is required in parliament, whether reservation is the right approach is debatable. Firstly there is the possibility of women elected under reservation being mere puppets in the hands of maledominated political parties. Also the law does not leave any incentive for the previous male leader to perform by removing any chance of him being elected again. Secondly, how sustainable is it? What prevents the big political parties who support the bill from distributing more tickets to women in the absence of this law? Empowerment will be achieved when women are competent enough to fight and win elections. Hence an ideal solution would be to simultaneously formulate long-term policies to drive womens education, rights and development so that the reservation is made redundant eventually.

now ensure that his or her taxes are being put to good use and that government officials are worthy of their appointments. In short, RTI makes accountable those who should be accountable. Private institutions are not accountable to the general public. They do not use public money, except of shareholders to whom they make appropriate disclosures. The customers and employees they serve have a right to question them if unjustly treated. Private companies do need to comply with certain legal norms, and inquiries can be initiated by law enforcement agencies into any suspect practices. Allowing any citizen to do this could lead to fraudulent attempts to attain proprietary information or increase administrative burden. Industries where consumers need more information, such as banking, could make such disclosures on a discretionary basis, earning customer loyalty in return. Or the government could lay down stricter disclosure norms for these sectors. Bringing the entire private sector under the RTI is definitely overkill for this purpose, and will do far more harm than good.

(Submission for Vidheyak, IIM-B)

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All forms of Government Welfare should be abolished. Submission for V-Govern, IMT-G
Landmark international events over the past two years have challenged the notion of state welfare. On both sides of the Atlantic, developed nations facing economic crisis have been burdened by a heavy spending state with huge welfare schemes. On one side, many Euro zone countries are grappling with huge and unsustainable fiscal deficits. On the other side, USA is trying to reform large entitlement programs like Social Security and Medicare to and reduce its debt obligations. One could argue that the challenges these economies face result from the question of welfare. All welfare schemes are targeted towards an equitable distribution of resources among all subscribers. However, the definition does not qualify the equitable distribution, resources and subscribers, which leads to several interpretations of equity. The first interpretation of equity involves distribution of resources accessible to only a selected population. Therefore, this definition restricts subscribers to a closed group of individuals. This can be seen in form of reservations in state-level educational institutes. An alternate definition involves granting benefits to recipients according to a pre-defined hierarchy. Equity can also be viewed as the subscribers being divided into blocs based on the naturally occurring distinctions gender, race, for example. Each bloc is entitled to an equal share on the whole. However, at the individual level, a disparate share is received. Women reservation bill is an example which adheres to this interpretation. The state welfare in form of subsidies to the BPL population provides for an equitable distribution where the historical usage of the resource is also considered. Therefore, the stress under this form of distribution involves equal value of the resources to the beneficiaries. Another interpretation is on the basis of equal values to the recipients. This interpretation is used when lower wages are granted in poorer nations as the va lue attached to the same is higher vis--vis developed nations. Other forms of equity involve random resource allocation which implies equal statistical chance of benefit, competitive nature where each recipient is given an equal opportunity to benefit and equal votes a process which was widely followed in carbon market development. The Welfare question takes us to the question of the role of the state itself. It thus depends on what social values are constructed as desirable- for which there are different schools of thought, as well as political ideologies. Leftist/liberal politics would argue for more welfare spending, while right-wing/ conservative politics would argue for reducing government- both positions being derived from underlying ethical and moral values. Libertarian philosophy says that individual liberty is the basic principle of the society and it advocates minimization of go vernment intervention to achieve this. It assumes that free markets are the best coordinator of society and holds the individual responsible for his/her problems. Proponents of Minimal State Theory such as Robert Nozick view the State as a dominant protective agency. While individuals are free to subscribe to any protective agency, the duty of state would be to ensure the protection to all who have not chosen to be members of the agencies. He rules out any taxation other than to provide protection to citizens, since taxation is viewed as a forced, avoidable, partial ownership of a product of ones talent. Any extension of the duties of the state, he reasons, would lead to forceful financing of services not wanted by all. On the other end of the spectrum is the Welfare State -which plays a key role in the protection and promotion of the economic and social well-being of its citizens. Such a state has huge welfare schemes and safety nets for its citizens. John Rawls also argues for economic re distribution in a manner such that the position of the poorest in the society is maximized in terms of benefits received. It views the responsibility of the state extending to ensure equal opportunities to all sections of the society. This necessitates affirmative action by the state to provide suitable opportunity to the disadvantaged section of the society. Each has its own disadvantages. Libertarians assume that a free market takes care of everything. But free markets are known to fail miserably in many scenarios. For instance, collective problems like Environmental degradation are difficult to recognise through market mechanisms as its difficult to place an accurate cost on its impact. In addition, free markets merely reflect peoples opinions, which might differ considerably with socially desirable goals. Free markets dont always provide equal opportunities to all sections of people. Social and economic mobility of meritorious but poor people are constrained. On the other hand, Welfare States creates market distortions whose cost might be higher than the social and economic cost of issues the welfare schemes addresses. Welfare schemes also acts as a disincentive to work. For instance, the unemployment benefits (includi ng non-monetary benefits) in some European countries (like France and UK) are higher than the minimum market wage, creating perverse incentives. In longer term scenarios, welfare schemes become political quagmires as once people become used to and expect a certain level of welfare, any initiative to reform or reduce these are met with severe political resistance from the scheme beneficiaries who would now lose out. The recent London riots were thus an expression of the youths frustration with the uncertainty brought on by government re-thinking several aspects of welfare, which they had grown to expect and feel entitled to. Ronald Dworkin provides a simple framework to evaluate what constitutes welfare and what does not. His basic premise is that an individual should be held responsible for outcomes of his own choices but are not responsible for the circumstances in which they make the choices . Welfare will then be a mechanism to compensate for un-chosen circumstances. For instance, being born into a poor family is not what an individual is responsible for. Subsidized education for that individual will constitute a legitimate welfare while free television might not. One of the commonly raised arguments against welfare schemes is that the cost of the market distortions can be huge enough to break the cause of welfare itself. Indias minimum support price system for farmers can be one such example. In such cases, the argument again boils down to what the states objectives: is to increase aggregate utility (in which case free market is the better option) or is to increase distributive utility (in which case the costs of market distortions are entirely justified. Carefully formulated policies might also reduce market distortions considerably allowing the state to maintain a balance. Efficiency is another important criterion to gauge welfare. Measuring efficiency involves specification of inputs and outputs and a monetary cost-benefit analysis. However, the approach disregards any non-monetary benefits for example any positive externality introduced. MNREGA, for example, has been severely criticized for developing short-lived low-quality assets instead of improving skills. Therefore, efficiency in terms of monetary costs and benefits is low. However, it can be argued that the scheme provides for social security and equality, the benefits for which can be difficult to monetize. Such practical problems in measuring the true impact of welfare can leave policymakers confounded and push them to take a simplistic stand against all welfare schemes. Additionally, a concern of implementation doesnt qualify as an deterrent against welfare as a whole. Brazils Bolsa Familia with its conditional and targeted transfers has defied the arguments that welfare schemes are not effective. For ascertaining effectiveness of social spending, government focus on public welfare also needs to be quantified. Social welfare can be broadly classified into three categories health, education and financial security. Therefore, the Human Developmental Index (HDI) which is a weighted average of indicators from these fields could be a valuable tool for analyzing welfare and its implementation. Looking at the relative ranking of countries according to their HDI scores, we found that the 10 top-ranked countries (Mostly Nordic and European), all had a very percentage of GDP spending for State-sponsored social welfare schemes- thus indicating larger welfare spending is critical for improving quality of life. Of course, this assumes that HDI is an adequate proxy for measuring quality of human life. While there are pitfalls in both schools of thought when it comes to welfare, neither is fully wrong. A modern state has to find the middle ground between these two extremes and find the right balance of freedom and intervention. To do that it must define its goals and how welfare achieves those goals. Amartya Sen states that welfare should create equal opportunities for all individuals to enhance their capabilities and freedoms which would result in the greater likelihood for individual success and society's success.

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Democracy and Responsible media

-by Hemant Yadav
The recent on-going News of the World phone hacking scandal in England has sent ripples around the world and brought up questions as to how such a thing could happen. The newspaper was accused of engaging in phone hacking, police bribery, and exercising improper influence in the pursuit of publishing stories. In July 2011, it was revealed that the phones of murdered schoolgirl Milly Dowler, relatives of deceased British soldiers, and victims of the 7/7 London bombings were accessed, resulting in a public outcry against News Corporation and owner Rupert Murdoch. Advertiser boycotts led to the closure of the News of the World on 10 July, ending 168 years of publication. The issue of responsible media involves ethics, morals and manner in which media is working in current days. Newspapers have been known to tap phones of politicians, film stars and other celebrities, but what has come as shock is that the victim now is the common man. This irresponsible way of working of media is not confined only to Britain, it is prevalent everywhere in the world, including India. There has been paradigm shift in functioning of media in the last two-three decades and the ethics of the media that have been cherished for a pretty long time are eroding. It is not that the institutions teaching journalism are not teaching nowadays the high principles that go with the profession. In India, there is an all-round decay with massive corruption, the corporate entry into media and the big time commercialisation of the media. It is well known that media is owned by big builders, and the journalists own shares in the newspapers they work in. They would never do anything that would bring down the shares of the newspaper they work in. This gives rise to a complex situation and it may not be totally correct to say that media is unethical. But all that said media is itself responsibility. Democracy is a responsible system, governance is responsibility, and the media has to be doubly responsible. Media has become a tool; and has put people behind bars and promoted many just causes as well. In fact, it has brought up many issues and kept the pressure on so that they do not go down. It has brought to the front collusion of between politicians and bureaucrats. It has been unethical at times but since it has done some good work as well, we cannot generalise. There have been actions taken to keep the media in check. The Paid News instance that had cropped up the last time when the newspapers had revenue targets to be achieved from politicians had been minimised in the recent elections. But it still exists and has to be completely eliminated. In recent times there have been fast growing social networks which act as major source of information for the newspapers and television channels. The social network is itself looked at as some kind of news so to say. The Economist relates this to the times two three centuries back where the whole concept of news emanated from the coffee shop where people talked news and other happenings and the whole broadcasting started. With Social network and new technology of Web, we are looking at news by interaction of the people. These dynamics make it complicated and it requires a lot of thought to make sure that good journalism and good information take place. Media is the most important watchdog in a democratic setup, but if media itself becomes the part of the corrupt game, it becomes a mad dog problem. While self-regulation is the right thing, it is not just happening. Moreover, the media does not like to be regulated by a body that is not its creation. Every developed country has a regulating body - FCC in USA, CST in France, Ofcom in UK, but in India broadcasting authority has never really picked up. All there is just a list of some general dos and donts to be followed. Also the television has seen exponential growth in the last decade. TV news broadcasters have set up a voluntary organisation, but they have to come up with structure and everything. At times they have carried out orders and they have been implemented. A prominent news channel had carried apology for 5 days about the news item that Indian army had complained about. Media coverage during the Telangana agitations has seen media follow a self-evolved code. While this may reflect the things are going in the right direction but more systematic effort is required. Major channels get the bulk of the advertisement revenues. Around top 10% have good profits and can agree on broad principles and guidelines. These have been mostly responsible for the good works being done by the media. The mischief and nefarious activities have come mostly from the regional and smaller players. Television is an expensive medium and lot of investment is made by TV channels and a good return is required to be in the business. The need to be profitable leads to newspapers resorting to unethical means. The so called Fourth estate, is supposed to do some introspection about what is wrong and what is right, but that does not happen in real world. There must be a regulating body that can take actions when the values are eroding. How to set up that body is another question. There is no hard and fast rule. It depends on the ethos, set up of the country and the socio-economic values. But any regulatory body setup should be insulated from the government and the media. A media commission is requirement of the day, compromising of expert bodies that can work out the requirements of the day and then set up a regulation model that works in the complex scenario that is there. A scandal like News of the World might not be possible in India given that such huge money and time investment in investigative journalism does not happen India. But the responsibility with which media works in India is hardly satisfactory and there is urgent need for effective regulation and enforcement.

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Legalizing Bribe Giving

(Submission for VidheyakIIM-B) Kaushik Basus argument about legalizing

Recommendations Submitted to DoT (based on discussion during Dissecting the new Telecom Policy by Prof. Rekha Jain, November 3rd)
Manufacturing

harassment bribes is based on the premise that bribe-givers are often victims rather than perpetrators of corruption.

Manufacturing fund worth Rs. 5000 to be set up to promote manufacturing. Telecom Standards Organization set up in this direction is a welcome move. Investing in these technologies can help in saving 30% of the spending on telecom manufacturing, which currently is attributed to the IPRs

A taskforce dedicated to promote manufacturing in India and make India a leader in telecom manufacturing equipment needs to be set up. However, it needs to be understood that expertise development is a gradual process and hence, the objectives of such an organization should be focused on the long-term benefits.

Most recently Delhi High Courts judgment in Aniruddha Bahal v. State which exonerated journalists who paid bribes to carry out a sting operation supports this view. The claim that legalizing such bribes will reduce corruption drastically, however, is tenuous at best. Dr. Jean Dreze makes a compelling argument that consequences of whistle-blowing may be grave enough and costs of litigation, possible harassment and delayed justice high enough to dissuade bribe-givers from whistle-blowing. Only those with the requisite resources, the well-off, might go through with it. They, however, derive benefit from the system and will have no reason to change it. Where the giver is poor, he will have no such recourse. The system will thus be stacked against the weak.

Currently, no fabrication labs exist in India. Specialized SEZs focusing on Fabrication in the country need to be setup.

Corporate Involvement

Telecom Finance Fund to be setup for encouraging entrepreneurship in telecom sector Representation to be provided to the private players in deciding the standards.

Licensing Policy

Hierarchal licensing system with levels like city-wide, region-wide or national should be considered. Competitive bidding should be used in for granting these licenses

This would provide an opportunity to the smaller players to enter the competition

Other

Further, legitimizing bribe-giving may diminish the moral deterrence against corruption. To secure an advantage for oneself in relation to those unwilling or unable to pay will be more attractive. We would do well as a nation to stop looking for silver bullets and instead look for underlying root causes of corruption and address them systematically.

Network and Service should be delinked. Granting of spectrum should not be decided on the basis of

revenue

quoted. Revenue sharing models can be considered for ensuring better services to the consumers.

Connectivity and reliability of service should also be included in the criteria for awarding of spectrum.

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FDI in Indian Retail

by Dr. Anil Kumar DC

based inflation has been a matter of great concern. The absence of a farm-to-fork retail supply system has led to the ultimate customers paying a premium for shortages and a charge for wastages.

No Global Reach The Micro Small & Medium Enterprises FDI up to 100% for cash and carry wholesale trading and export trading (MSME) sector has also suffered due to lack of branding and lack of avenues to reach allowed under the automatic route. out to the vast world markets. While India FDI up to 51 % with prior Government approval (i.e. FIPB) for retail trade has continued to provide emphasis on the of Single Brand products. development of MSME sector, the share of FDI is not permitted in Multi Brand Retailing in India. unorganised sector in overall manufacturing has declined from 34.5% in 1999-2000 to Entry Options For Foreign Players prior to FDI Policy 30.3% in 2007-08[12]. This has largely been Although prior to Jan 24, 2006, FDI was not authorized in retailing, most general play- due to the inability of this sector to access ers had been operating in the country. latest technology and improve its marketing interface. Franchise Agreements: In franchising and commission agents services, FDI is allowed with the approval of the RBI under the Foreign Exchange Management Act. FDI in Multi Brand Retail This is a most usual mode for entrance of quick food bondage. Apart from quick food The government has not defined the term Multi Brand. FDI in Multi Brand retail imbondage identical to Pizza Hut, players such as Lacoste, Mango, Nike as good as plies that a retail store with a foreign investment can sell multiple brands under one Marks as good as Spencer, have entered Indian marketplace by this route. roof. FDI Policy with Regard to Retailing in India Cash And Carry Wholesale Trading: 100% FDI is allowed in wholesale trading which involves building of a large distribution infrastructure to assist local manufacturers. The wholesaler deals only with smaller retailers and not Consumers. Metro AG of Germany was the first significant global player to enter India through this route. Strategic Licensing Agreements: Some foreign brands give exclusive licences and distribution rights to Indian companies. Through these rights, Indian companies can either sell it through their own stores, or enter into shop-in-shop arrangements or distribute the brands to franchisees. Mango, the Spanish apparel brand has entered India through this route with an agreement with Piramyd, Mumbai, SPAR entered into a similar agreement with Radhakrishna Foodlands Pvt. Ltd Manufacturing and Wholly Owned Subsidiaries: The foreign brands such as Nike, Reebok, Adidas, etc. that have wholly-owned subsidiaries in manufacturing are treated as Indian companies and are, therefore, allowed to do retail. These companies have been authorized to sell products to Indian consumers by franchising, internal distributors, existent Indian retailers, own outlets, etc. For instance, Nike entered through an exclusive licensing agreement with Sierra Enterprises but now has a wholly owned subsidiary, Nike India Private Limited. Limitations of the present setup Infrastructure There has been a lack of investment in the logistics of the retail chain, leading to an inefficient market mechanism. Though India is the second largest producer of fruits and vegetables (about 180 million MT), it has a very limited integrated cold-chain infrastructure, with only 5386 stand-alone cold storages, having a total capacity of 23.6 million MT. The chain is highly fragmented and hence, perishable horticultural commodities find it difficult to link to distant markets, including overseas markets, round the year. Storage infrastructure is necessary for carrying over the agricultural produce from production periods to the rest of the year and to prevent distress sales. Lack of adequate storage facilities cause heavy losses to farmers in terms of wastage in quality and quantity of produce in general. Though FDI is permitted in cold-chain to the extent of 100%, through the automatic route, in the absence of FDI in retailing; FDI flow to the sector has not been significant. Intermediaries dominate the value chain Intermediaries often flout mandi norms and their pricing lacks transparency. According to some reports, Indian farmers realize only 1/3rd of the total price paid by the final consumer, as against 2/3rd by farmers in nations with a higher share of organized retail. Improper Public Distribution System (PDS) There is a big question mark on the efficacy of the public procurement and PDS set-up and the bill on food subsidies is rising. In spite of such heavy subsidies, overall food In July 2010, Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce circulated a discussion paper on allowing FDI in multi-brand retail. The paper doesnt suggest any upper limit on FDI in multi-brand retail. If implemented, it would open the doors for global retail giants to enter and establish their footprints on the retail landscape of India. Opening up FDI in multi-brand retail will mean that global retailers including Wal-Mart, Carrefour and Tesco can open stores offering a range of house-

hold items and grocery directly to consumers in the same way as the ubiquitous kirana store. Conclusion: It can be said that the advantages of allowing unrestrained FDI in the retail sector evidently outweigh the disadvantages attached to it and the same can be deduced from the examples of successful experiments in countries like Thailand and China; where too the issue of allowing FDI in the retail sector was first met with incessant protests, but later turned out to be one of the most promising political and economical decisions of their governments and led not only to the commendable rise in the level of employment but also led to the enormous development of their countrys GDP. Moreover, in the fierce battle between the advocators and antagonist of unrestrained FDI flows in the Indian retail sector, the interests of the consumers have been blatantly and utterly disregarded. Therefore, one of the arguments which inevitably needs to be considered and addressed while deliberating upon the captioned issue is the interests of consumers at large in relation to the interests of retailers.

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Team Chanakya: Winners

Chakrvyuh The Public policy flagship event of Confluence 11 Chakravyuh, the notorious stratagem of the Kauravas, supposedly looked like a blooming lotus from above: layer upon treacherous layer of strategic quagmire which leads you to the centre of nowhere only to challenge you to get out again. Chakravyuh, the public policy flagship event of Confluence 2011 was no different. It simulated the Indian political scenario with a whirl of intellectual challenges involving a variety of social, economic and political problems. Five teams were selected at the end of the first two online rounds, a mix of selection and election rounds which tested the participant teams ability to mobilize popular support for their fictional parties. Fifteen teams posted their manifestos in Confluences Facebook page and five teams were invited for the final round on campus based on the hits they were able to generate.

The on campus final round started with a mild teaser quiz testing the teams political acumen: an artfully deceptive outer layer of the lotus which lets you in only to engulf you into bigger conundrums. The next round - Stakeholder Analysis, judged by Prof Ajay Pandey, Prof Ankur Sarin and Prof Samar Dutta required the teams to analyse the effects of their policies on various stakeholders. The teams were judged on their ability to come up with comprehensive and inclusive analysis of all stakeholders involved. The third round Master of Spin, again judged by Prof Ajay Pandey, Prof Ankur Sarin and Prof Samar Dutta put the teams in the midst of the shady side of politics involvTeam PointBlank: 1st Runners Up ing corruption, libel and scams. The round true to its name required the teams to spin the defaming scenarios into favourable situations and win political brownie points. The teams after the three gruelling rounds were now in the centre of nowhere. They have faced the boggling googlies of the judges but they havent faced their fiercest enemies yet: themselves. In the next round Sabha Survivor, an improvised political twist of the famous desert survival game the teams will face off each other in a parliamentary setting and try to push their agenda on to their fellow sabhaites. The last leg of the chakravyuh, Niti Kosh, involved testing the camaraderie of the teams. The teams played a word association game which required them to communicate a word by describing it: a test for subtlety of political communication where as Borges would put, in a riddle to which the answer is knife, the only word that cannot be employed is knife.

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Volume 1 Issue 3

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December , 2011

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