Ideas for India’s future

Issue 22 - Jan 2009

Excerpts from an exclusive interview; and excerpts from a book review


Nitin Pai

IN ADDITION to being co-chairman of the board of Infosys Technologies, Nandan Nilekani is engaged in a number of public policy initiatives—he is the president of the National Council of Applied Economic Research, a member of the National Knowledge Commission, a member of the board of governors of the Indian Institute of Technology, Bombay and is involved in numerous other governmental and non-governmental initiatives. The range of his interests and his passionate commitment to India’s future comes out in his book Imagining India – Ideas for a new century (reviewed independently on page 25). As indeed, in his voice when he spoke to Pragati.

How would you define India’s national interest? When we posed this question to Jaswant Singh, he said it was the preservation of the resilient core of Indian society that is the heart of India’s national interest, because it is Indian society that keeps the wheels turning whatever is the political structure of the state. According to K Subrahmanyam, India’s national interest is to ensure high rates of growth, alleviate poverty and ensure good governance. 

Anything that we can do to make the country stronger, more equitable, more secure, more fair and which can truly leverage the extraordinary opportunity—that would be the national interest. The definition of Indian society is amorphous and is prone to multiple interpretations. My view is that it is very rare that nations get an opportunity to lift a billion people out of poverty. And due to a confluence of events that I have described in my book, we have a truly extraordinary opportunity that comes once in a millennium. It is in our national interest to make the most out of that opportunity and achieve economic independence and fulfilment for all our citizens—doing that would automatically address the other challenges that we have.


Human capital

Your book is about ideas, and you have quoted a number of people and their ideas. If you were to pick one to focus the governance agenda of the coming central government, what would it be. 

The most important idea and the central theme that I start off in my opening chapter is the change in our view of the population. For a long time, in part due to international pressure, we treated our population as a burden and something that needed to be controlled. But today, we’ve finally realised that people are our biggest strength, our assets and not liabilities, that human capital is what makes you tick. The moment you think of our people as human capital then automatically the challenge becomes how do we make sure they are healthy, educated, have roads to go to work and school, have lights to study at night, have jobs and can become entrepreneurs. The fundamental shift in the way we think about population is the central theme of my book and everything I talk about is how do we leverage and exploit that human capital, and what are the obstacles that you see in doing that.


If I were to stretch that – what would be the policy measure that would stem from this idea:

Part of it is execution—in areas like single markets, urbanisation, primary education and infrastructure, for instance, I don’t think it’s a policy issue so much, because there is a demand for that from the people, and there is political will. It is about doing it right, on time and with quality. Take primary education—there’s a huge amount of money coming down the pipe, and there’s a huge demand from the poor who have realised that lack of education impairs their economic mobility. So you have demand and supply, but execution is a problem—getting schools to work, getting teachers to come… 

The policy issues—which I talk about in my third section—first, we need to completely deregulate our higher education: it is unfair on our part to deny our children a good education. That’s exactly what we are doing by all these artificial constraints we have put on the sector, in the form of the whole “HRD Raj” that we have. 

Second: labour reforms, and creating an environment where companies and well-meaning entrepreneurs can create a large number of jobs with the flexibility to be able to contract the work force when necessary. Today, due to the inflexibility of our labour laws, entrepreneurs are developing capital intensive industries when there are a large number of people who need jobs. On the other hand, 93 percent of the employment in the unorganised sector where people have no rights whatsoever. This is clearly an untenable situation. We need to change that and create a large number of jobs in the organised sector. 

And third, if we are able to do these then we don’t really need reservations, because reservations is a way to parcel out quotas from an small existing capacity. It is much better to expand capacity so significantly that nobody really needs reservations; and we move towards a system of affirmative action where we offer people opportunities instead. 


Right shift

It’s hard to dispute your contention that the extremes must be rejected in favour of a fine balance. But anyone born before 1991, and perhaps after that too, has been raised on a diet of socialism. The population may be young, but most of our politicians and decision-makers still carry socialist baggage. In this climate, isn’t it necessary for those who believe in liberalism to take extreme positions so that the balance moves towards the right? In other words, shouldn’t those who want to bring about centre-right outcomes take an unabashed stance in favour of individual rights and economic freedom?

The experience of the world, including the current economic crisis has demonstrated that unregulated markets are as bad as unrestricted socialism. Markets are very powerful and useful instruments…they are the engines of economic progress and the only known way of raising the standard of living of billions of people. At the same time I think we need to balance markets with very good public governance and public accountability. The last section of my book, which is about anticipating the future, looks at health, pensions, energy, environment and technology. There is clearly a huge role for the state to make the right choices so that it can create the right environment in which markets can operate. 

Markets should operate freely within a framework of rules, regulations and incentives. I’m not in favour of a state that hunkers down and decides who should produce what but more in terms of public policy. For example, if you want to drive a post-carbon economy, you can’t do it in a big way without public policy. I’m a strong believer in markets, but I also think that markets should be complemented with a very strategic thinking state.

But is there enough in the public discourse in terms of selling market ideas to the people?

Absolutely not. In fact, one of the arguments I make in the book is that half-done reforms are worse than no reforms. Because when you have half-done reforms, those of us who have access to education, English language and jobs can really prosper in this economy, and those who don’t get shut out. Rather than positioning our reforms as something which is to make rich people richer, the real part of reforms is to broaden the access to opportunity—of education, infrastructure, healthcare to the common man. Reforms have not been positioned as something that lead to improved opportunities. That’s one of the political failures. All our reforms are done under stealth by our technocrats as if its something they shouldn’t be doing. If sold properly, reforms are pro-people, and not pro-rich. This has not been sold well-enough. 




Harsh Gupta

But Imagining India is not all policy and is in fact peppered with many perspicacious observations about our society, politics and history. A section which beautifully combines all three is about the English language which Mr Nilekani calls “The phoenix tongue”. Tracing the language’s evolution in India from a colonial administrative language to a neutral language in the post-independence linguistic battles to finally the language of upward mobility in a knowledge economy, he says that we have finally accepted the language and that no chauvinistic politician today can deprive rural and poor children of an English education without facing a “groundswell” of protest.

The structuring of the book into four parts—ideas that we have accepted and implemented, ideas accepted but not implemented, ideas presently under debate, and ideas for future debates— precludes an episodic feel to the chapters. And while the first three parts, in some form or shape, are standard fare for the recent crop of non-fiction on India—it is in the last part that the book really stands out by daring to be innovative as well as controversial.

Indeed Mr Nilekani accurately presages and pre-empts future leftist attacks by advocating for a “social insurance plan, built around defined contributions (and not defined benefits)…would touch a demographic sweet spot…leveraging the growing value of India’s capital markets in the next few decades”. He explains that this policy would not only be economically inclusive, but would bolster government revenues from the capital markets instead of depleting it with pay-as-you-go Ponzi welfare schemes.

But the book—clearly being a tour d’horizon—can feel a little dry and encyclopaedic at times because historical contextualisation and copious quotations of experts is included in every section. At the same time, the author’s internal thought process and struggles—why he rejected and accepted certain policy alternatives—is not well documented throughout. So the author’s debate with himself should not have been edited in favour of a this-or-that position pitch, ignoring a spectrum of policy options on some issues.

For example, in the section over what India’s policy response to global climate change should be, carbon taxes and emission caps for India are directly endorsed. But the question remains: even given the scientific consensus on anthropogenic global warming, what is the opportunity cost of mitigating global warming? In other words, is the current cost to combat global warming less than the net present value of future costs if the problem is not addressed on a war footing?

Furthermore, is it in India’s national interest from a strategic point of view to commit to ceilings and green taxes now? These are tough issues but the economic future of millions is at stake. Maybe sticking to carbon credits while further encouraging technology transfer globally and better environmental practices locally is our best option.

On the whole though, Mr Nilekani’s vision of overcoming India’s “vertical divides” of caste and religion through economic growth and reforms is highly inspiring and relevant. Quoting Martin Luther King Jr, he says that we must understand “the fierce urgency of now”, lest our demographic dividend goes waste by staying on this statist, quasi-socialist path. This book needs to be read carefully by all thinking and compassionate Indians. They might even convince public-spirited entrepreneurs like the author that they are in fact not “unelectable.” Because even if positive change in India is inevitable, competent citizens need to usher it in.

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