Media News Archive

Memo to Kejriwal

New political parties in India face structural and ethical hurdles

The efforts of a group of India Against Corruption workers to float a new political party have generated a lively debate. Opinions vary from unrestrained romanticism to unyielding cynicism. But it will be productive to go beyond personalities and power games.

Why is there political unrest and disquiet in the country? There is a sense of foreboding among all thinking citizens. Politics is too polarised. There is a great churn, evidenced by the rejection of both the Congress and the BJP in recent state polls. Parties are forced to rely on criminals, dynasties or money bags for funding. Corruption is rampant. Reckless populism is hurting the exchequer. Infrastructure is in a shambles, stunting economic growth. The fiscal deficit is out of control. Governments and parties seem to be powerless to arrest the drift and there are grounds for serious concern.

What do we, as a nation, need to do to address this crisis? We need to mobilise the middle classes and the youth, who are shunning politics, into meaningful political activity. True politics is vital to reconcile conflicting interests in society, make rational choices, allocate resources wisely and enlist public support in nation-building. At the very least, we need to make ethical politics sustainable. Education, skills and employment must be at the core of our governance if we are to end discrimination by birth and poverty. We need to empower local governments and give people at the community level the opportunity to make a difference.

We need to address the challenge of short-term populism versus long-term public good. In a democratic society, there is a political price to pay for pursuing rational and sound public policies. If our quest for votes at any cost leads to short-term maximisation and instant gratification, we will be enjoying tomorrow’s fruits today, endangering the future. All parties must agree on the role of state in a modern society. No matter which party is in power, we need a clear sense of purpose and direction as a society. Parties should provide the platform and politics is the process to achieve this. It is because politics, which ought to be the solution to the nation’s crises, has become the problem itself that we are in a quandary.

Do we need new parties now? We already have over 1,000 registered parties. In a mature democracy, concerned citizens with passion and leadership qualities enter a party of their choice and ascend to power through the democratic process. But our party system is fossilised and sclerotic. Most young members of Parliament are in office because of heredity. A person of competence and commitment entering a party and rising to leadership by virtue of public support through a transparent, democratic process is unthinkable in India today. Traditional parties have lost the capacity to attract, nurture and promote leadership of quality. If committed citizens wish to make a difference through politics, the only option is to form a new party. But party-building and electoral success are excruciatingly difficult.

What are the hurdles a fledgling political party will face? The very classes that should be at the forefront of political transformation are now reviling politics and abdicating from it. It is a challenge to bring them into the political process in a creative and constructive engagement. Once this is accomplished, attracting citizens of leadership potential is a difficult task. Citizens are marginalised and citizenship is devalued. There is abject dependence on those with power and influence even for simple services — a ration card, birth certificate, school admission, FIR registration, land records, etc. Therefore, voters want “strong” leaders with significant economic clout and organisational strength, preferably backed by years of visible public service. Potential leaders with such qualities are generally unwilling to be associated with politics, for fear of retribution from the established parties. Even those prominent citizens who do not seek state patronage prefer to play safe, as they do not want to burn bridges with the establishment. Thus, even those who are convinced they should pursue political office to promote public good tend to opt for traditional, established parties.

Then there is the problem of ethically competing against freebies and short-term sops offered to woo the electorate and the divisive politics practised to polarise a diverse society. Our first-past-the-post electoral system demands a high threshold of voting for electoral success. As people perceive that a candidate or a party, however good and desirable, will not succeed, they tend to indulge in tactical voting to vote for the second-worst candidate to prevent the “worst” from getting elected. Often, our election is a choice between two top parties, not between all candidates or parties based on their qualities.

So how do we help transform politics? First, new, ethical parties should work together to maximise their influence. At the very least, they must not hurt each other. Second, genuine, pragmatic reforms should be pursued simultaneously. While no one reform is sufficient, cumulatively they can change society and alter incentives, making political transformation that much easier. Third, there must be a push within the large, established parties for internal democracy and modernisation. Finally, both the Congress and the BJP, and other significant parties like the Left, BSP, SP, should realise that the electoral system needs to be changed. In four of India’s six largest states — UP, Bihar, Tamil Nadu and West Bengal — both the Congress and the BJP are electorally insignificant. This is because once a national party falls below a threshold vote, its support quickly evaporates. A shift to proportionate representation will strengthen national outlook, minimise vote-buying, and encourage the best and brightest to enter politics and place their talents at the service of the country.

By Dr.Jayaprakash Narayan

Courtesy: Indian Express

Tuesday, October 9, 2012 - 21:31

Success of FDI decision will depend on implementation

The Union government’s decision of September 14 conditionally permitting FDI in multi-brand retail trading generated a lively debate. Careful scrutiny does not justify the claim that retail FDI in itself is a game changer transforming our large and diverse economy. Nor does it substantiate the apocalyptic visions some critics harbour.

We need to examine dispassionately three issues to arrive at a balanced conclusion: the direct benefits and risks; the impact on investment and growth; and the impact on current account deficit.

First, let us examine the direct impact. Clearly, there are potential benefits as well as risks. Indian farm sector is in a long-term crisis. The share of agriculture in GDP is declining every year, and it now stands at about 15%. But the proportion of population dependent directly on agriculture is declining much more slowly, and now stands above 50%. A simple arithmetic tells us that the per capita income of the 50% Bharat is only 18% of the rest of the population. Against such a backdrop, there is no substitute to rural wealth creation and value addition.

There is an uncommonly long, inefficient market chain between the farmer and consumer right now. As a result, many studies show that the farmer typically realizes 35% of the consumer price in most agri-products. In case of perishables, the farmer’s share could be as low as 12-20%. High volatility of prices is very common because of poor transport, storage and other back-end infrastructure.30-35% of the horticultural produce is estimated to be going waste in India. On a total production of about 200 million metric tonnes (MT) of fruits and vegetables, our cold storage is only about 23.6 million MT, 80% of which used only for potatoes!
Clearly, we need to do three things: compress the market chain and reduce the ‘distance’ between the farmer and the consumer; build a modern, integrated logistical chain involving grading, transport and storage; and add value to perishable commodities to reduce volatility and create wealth and jobs. All these things need investment, infrastructure, technology, management practices and deep pockets.

It really does not matter who invests in this critical sector. As Deng Xiaoping famously said, “It does not matter whether the cat is white or black, as long as it catches mice!” A compressed market chain, reliable logistics and infrastructure and value addition that organised retail industry brings will improve farmer’s price realisation, and reduce consumer price. If markets are improved, greater investment will flow into agriculture.

But we need to ensure that there is fair and effective competition, and monopolies are firmly checked.

The big concern is the large employment in retail sector. This sector now employs an estimated 30 million people in India (about 7-8% of working population). Most of these are low-end jobs with meager incomes. Of these, about 10% are in large cities where FDI in retail chains is permitted. Probably about 3 million people are eking not a precarious livelihood in big cities of one million plus population. Evidence shows that about 1.7% of the small retailers are closing down annually on account of competition from large chains wherever such chains are established. This translates into loss of about 51,000 livelihoods in big cities, if all cities have organised retail chains. It is estimated that about 1.5 million direct jobs will be created by organised retail at the front-end over the next five years. In logistics, infrastructure, and value addition probably an equal number of new jobs will be created. Most of the small traders can be absorbed in the direct and indirect employment. The policy must provide for such safeguards. Transition mechanisms should include up-gradation of small retailers, franchisee models, cooperatives and institutional development similar to NDDB.

Retail trade is growing at 13.3% CAGR (2006-10). It is estimated that modern retail will be growing at 25% or more per annum, while small retailers will still grow at 10% or more. Therefore small retailers will have a share of about 75% (as seen in South-East Asia) in a much larger market, and will co-exist with organised retail chains.

Then there is the issue of investments and growth rate in the country. Our savings rate, which stood at about 23% of GDP in 2002 has risen to 37% in 2008, and has now declined to about 32%, in 2011. FDI in any form will stimulate growth in a capital-scarce country.

Finally, our current account deficit is roughly about $78.2b, or 4.4% of GDP. This level of deficit is unsustainable. FII investment may increase with capital market revival, but it is hot money which can disappear at the first sign of trouble in India or elsewhere. We need stable, long-term investments in the form of FDI, which will in-turn bring technology, growth, jobs and incomes.

On balance, if retail FDI is handled well, it will be a win-win situation for us. But for a large and diverse economy like India, there cannot be instant fixes and panaceas. We need to leverage our strengths systematically and boost growth and employment.

By Dr.Jayaprakash Narayan - The author is the founder and president of Lok Satta Party – new politics for the new generation

Courtesy: DNA India

Wednesday, October 3, 2012 - 10:54

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