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Economics for India

Monthly Archives: December 2013

NaMo or NoMo?

08 Sunday Dec 2013

Posted by paragwaknis in politcal economy, socioeconomic perspectives

≈ 1 Comment

Tags

BJP, economic growth in India, Indian Elections, Narendra Modi, social health

Given the success of BJP in recent assembly elections, I think this note that I wrote on October 17 is even more relevant!

It is interesting time in India. The general elections are round the corner and there seems to be a really heated debate on which party and eventually which person is going to be given a chance for the next five years. It is actually heartening to see so many people sincerely expressing their views, concerns, opinions in the form of comments, status updates, links and news sharing, etc. This truly is the moment of different kinds of “Springs” all over the world in part fueled and sustained by social media. Being a college student in mid 1990s in India, I don’t think I had any inkling of how enormously effective and thoroughly transformative some of these technologically facilitated human interactions would be. I only hope it brings good in India as well.

The political choice that Indians face are truly enigmatic and dynamic. It is the choice between long-term social health and probable immediate economic gains. They have experimented with political solutions in form of coalition governments in the hope of delivery on economic front while not compromising on social front. But that has not been very successful and they are becoming impatient. Frequent exposure to distant greener pastures from foreign lands through actual visits or through popular media has made the realization of what the country lacks only extremely acute. People know that it is possible to do better and yet somehow politicians seem to be failing to facilitate the journey and at times even holding it back for their personal gains.

How would the electorate respond? Given the inefficiencies and delays of a coalition government, I think people are going to respond by electing a single party that shows the capacity to deliver. BJP was very clever to understand this and this shows in its choice of Narendra Modi as a prime-ministerial candidate. He had the success of Gujrat behind him though not all of it is his making. Gujrat has been a developed state for decades before Modi. But that does not matter. Perceptions have been shaped that Modi can deliver by repeatedly touting his success. His background also facilitates polarization of the society into two clear sections facilitating a majority vote. If you are a Hindu and stand for progress then you have to vote for BJP and Modi. Otherwise you are stuck with Congress with no strong leadership and allies that only drag it down. Some opinion polls already show that people would have a government that would act and not a juggernaut that does not move on any front.

True that the neo-liberal economic policies, as the Indian left calls the economic reforms, has left a lot to be desired. Markets have their limitations and there should be decisive government actions to keep them working efficiently and avoid being captured by few powerful interests. Traditionally the Left should have done this- worked asa watchdog. However, it has done a big disservice by neither providing an alternative economic framework nor making sure that reforms go ahead but they do not serve vested interests. The only thing they have achieved by constantly supporting Congress to avoid BJP from coming to power is forgone economic opportunities and a total lack of a meaningful debate on appropriate economic policies.

So looks like the results are clear even before election. Unless Congress manages to portray a strong non-Gandhi political leader, people are going to side with BJP. In this process, if society becomes more divisive or intolerant of diversity of people or opinions, that would be tolerated. The trade off between long term social health and immediate prosperity will be resolved in favor of prosperity. Who knows- at some point down the line when people become enough prosperous they might decide to give social health and true participatory democracy a chance.Till then we will have to wait and see. I only hope that by writing this I do not perpetuate a self-fulfilling prophecy. So as a caveat do remember what Keynes once said-

 “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.”

 

PISA Scores and Human Capital in India

04 Wednesday Dec 2013

Posted by paragwaknis in economic reforms, education, growth, socioeconomic perspectives, Uncategorized

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Tags

Gustavo Ventura, Human Capital in India, India, Labor Quality, PISA, PISA scores India, Pratham, Schooling in India

I came across this interesting paper by Gustavo Ventura and his coauthors titled “Talent, Labor Quality, and Economic Development” in which they use PISA scores as a measure of quality of labor. They show that there are huge differences between labor quality between rich and poor countries based on these scores and they could explain some of the income differences across the world. Developed countries like the US, Canada and Western Europe have been investing in education for the past 200-300 years. The dividends that are being reaped now are because of this huge investment. Unfortunately, India does not figure into the analysis because we have shied away from taking the test. Only two states, Tamil Nadu and Himachal Pradesh, volunteered and the results are not at all encouraging. You can find some analysis here, here and here.

Employers in India have been lamenting about quality of human capital for a while now. There is an urgent need of reform starting from schooling to address such concerns effectively. Of course there are Indian kids who could surpass the rich country kids in these tests- all the ones who would eventually go to IIMs, IITs, and other elite educational institutions in India for example could do that. Students who come from educated families in general will be also in this list. But all said and done this is still a tiny winy percentage of the population. To reap the demographic dividend for economic growth, skill improvement needs to happen at much broader level than that. One could also argue that PISA tests does not really measure skills. Pratham has been conducting its own tests and the results are not very different!

How are we going to do this? Poor infrastructure, Teacher absenteeism,  and quality are some of the major problems at all levels of education in India. Some of it would need more investment but a lot could be achieved if incentive structures are changed to motivate the stakeholders to improve outcomes. For example, curriculum and school calendars may have to be revised to meet the local constraints and maximize attendance and learning. Research shows that poor quality of schooling reflects on performance in higher education and eventually the job market outcomes. This provides additional rationale for improvement of schooling across the board.

As we are on the topic of unused capacity and perverse incentives it has to be noted that this problem is not only limited to schooling. I know colleges in Pune, India where the classrooms are empty while students pay through their nose for coaching classes. The quality of education provided is overall abysmal. In order to get as many students through the college system as possible, there has been significant dilution of syllabus for almost all the courses through out. Centralized and standardized examination system has only made matters worse. It has taken away the agency from college teachers- no wonder there is huge apathy towards increased effort.

Moral of the story: education in India needs reform! This is one area where government spending and investment could really make a difference. The story about India’s PISA scores only underscores the dangers of continued neglect of such impetus to education.

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