Have citizens lost faith in government bodies?

AS INDIA enters 2012, the country is at an important crossroads. At one level, the expansion in the quantum and breadth of economic activity remains impressive, and reflects the ways in which sections of the country’s population are transforming their lives for the better. Despite this, 2011 heard a cacophony of voices raising questions about the tenuous character of India’s growth story, repeatedly flagging concerns about systemic inertia, policy paralysis and leadership weaknesses. What accounts for all this? We should start by recognising that the scale of changes in India over the past few decades has placed an extraordinary amount of pressure on governmental institutions that were created in the period of the licence raj, and some, even earlier. Many of these institutions are characterised by attributes that they inherited from the colonial period, when the state’s priorities were different from those that came to be articulated in the Indian Constitution in 1950. Many of these postcolonial inertias and inefficiencies, instead of going away, ossified in the early years of independence, through to the 1980s. A product of such a past, branches of our government are clearly feeling the pressures of keeping up with a globalising India with all of its attendant energies — an information economy, accelerated migrations, the widening gap between rich and poor, and so on. Simultaneously, the distinctions between the state, private sector and civil society are becoming fuzzier than in the past, posing serious questions about the character of India’s democratic culture. Without underplaying the importance of economic growth, it is clear that for the majority of citizens to experience the benefits of a growing economy in their liberal democratic polity, institutions of the state — the legislature, executive, and judiciary — have to tread a fine line. They have to perform in ways that are aligned with their economic context, while simultaneously remaining true to the principles enshrined in the Constitution. To achieve this balance, institutions have to perform efficiently and consistently, but also retain their legitimacy in the eyes of the citizenry whose interests they serve. It is a truism of political theory that political legitimacy is considered a basic condition for governing, without which a government will suffer legislative deadlocks and collapse. It is in this context that we must look at the events of 2011. There is a widespread consensus that 2011 should be seen as year in which dissatisfaction with the status quo manifested itself in unexpected ways around the world. The Arab Spring and the Occupy Wall Street gatherings merely serve to punctuate what has been a much more widespread phenomenon globally, over the past decade. Closer to home, the climactic (or, anti-climactic, depending on your point of view) denouement of one phase of Anna Hazare’s movement in December serves to vindicate the views of many who feel that India’s governmental apparatus, especially the legislature and executive branches of the state, are failing to meet the expectations of an India witnessing the heightening of social and economic divisions. When the winter session of Parliament recently ended unsatisfactorily, a collective groan of disenchantment spread through the country. This sense of disappointment grew out of a growing realisation that India’s institutional arrangements are not only finding it difficult to function effectively; but more troublingly, that they are disconnected from the majority of Indians, in a quixotic land of their own whose internal turf battles have little meaning for most of the country’s people. How has this played out? Let us list some of the issues that were centrestage at the national level this past year: corruption, food security, land acquisition, foreign direct investment — the list is long. A glance at the ways these issues were debated reveals that by and large, the political class expressed themselves along party lines, and the country’s policy establishment predictably built on these debates by going deeper into the operational challenges posed by the proposed reforms. As in the past, the flurry of excitement surrounding the arrival of each of these issues was succeeded by a period of passivity, and worse, of condescension about people’s expectations. Where 2011 was different, however, was in the way that citizens reacted when they were confronted with governmental indifference. The events of 2011 reveal how far Indians feel skeptical about the ability of the many existing institutions of the state to deliver on what they have been mandated to do. Anna Hazare’s movement, in this sense, touched a chord of popular disenchantment against the apathy of governmental institutions; the ‘corruption’ issue was largely a subplot. This reading of the events of the recent past raises questions for the current discussions on the challenges of ‘institution-building’. It is relentlessly argued that India today needs better institutions, ideally those that are professionally-run. One agrees with this claim (with the caveat that the meaning of ‘professionally-run’ is debatable) — but matters do not end there. I say this because one’s interpretation of this exhortation — that we need institutions — depends largely on one’s definition of an ‘institution,’ why it exists, towards what end, and most importantly, for whom. Fundamentally, the successful implementation of rules and systems is tied to their legitimacy in the minds of those who are expected to follow them. What are the determinants of such legitimacy? Start with the tasks and outcomes that a citizenry expects its institutions and systems to deliver, and then work backward from there. Is the mail reaching on time? Do schools successfully educate kids? Does the garbage get cleaned up? Rather than counting post offices, ensure that the mail is getting delivered. Instead of tallying the numbers of enrolled students, find out if they’re learning anything. Do not tout the amount the government spends on the Jawaharlal Nehru National Urban Renewal Mission, make sure that roads are free of potholes. In a nutshell, find ways of making institutions accountable to citizens in ways that have a tangible impact on their lives. This is the bare minimum people expect of their government. Such outcomes earn institutions their legitimacy. The legitimacy of our existing institutions has taken a battering this past year. Let us hope that in 2012, the good sense that sustains any good democratic polity reverses this pattern. Such reversals have occurred in the past, and there is no reason that this cannot happen again.

When the Indian Cabinet cleared the deck for Foreign Direct Investment (FDI) in the multi-brand retail sector after years of discussion, there was joy in many quarters. The government called it ‘another revolutionary leap’ after the IT revolution and liberalisation. But the euphoria was not shared by those who saw it as a step that could crush the ‘little guy’

Once the announcement to allow FDI in multi-brand retail was announced, the Opposition Bhartiya Janata Party (BJP), an advocate of FDI in retail when in power between 1999 to 2004, opposed the move and created a ruckus inside and outside the Parliament. Some of the alliance partners of the ruling United Progressive Alliance (UPA) government also went with the Opposition’s argument. Under intense pressure, the government had to put on hold the decision to allow 51 per cent FDI holding in the multi-brand retail trade and raise the FDI ceiling from 51 to 100 per cent in the single-brand retail trade. However, the cap on the cabinet decision has uncapped a new debate about the merits and demerits of FDI in the retail sector. The proponents of FDI claim that it will have a positive impact on farmers, give a fillip to post-harvest infrastructure like modern warehousing and cold storage, and give growers a competitive rate for their products. It would also free farmers from the clutches of middlemen who deprive them of their share of profits. For the believers, FDI in retail is all about rural upliftment and reform in a market-driven manner. It is also claimed that the massive investment in trade and supply chains will reduce and stabilise prices of food grain, thereby taking care of seasonal inflation. The argument goes that FDI provides better choices to consumers in terms of pricing and the experience of shopping. Another persuasive argument put forward is that the entry of big international retailers will create at least one billion jobs. Supporters of the move don’t buy the argument that traditional small retail shop owners, the neighbourhood mom-and-pop stores, will be impacted. But opponents discount these virtues as corporatesponsored propaganda to sell an idea under pressure from multinational companies and the western world. They claim that the presence of the Walmarts et al will eat up traditional grocery shopowners. They fear that farmers with small landholdings will be reduced to penury as big retail houses target only big farmers. On the possibility of food inflation coming down, critics argue that the inflationary phenomenon has to do with shortages on the supply side and distribution bottlenecks, which fall in the government’s domain. Anti-FDI groups counter the ‘increased employment’ factor with the query that when more than 500,000 traders will be displaced in a single metro like Delhi by the advent of big retail houses, how would the creation of a few thousand jobs compensate? Some doubts are valid, like the issue of farmers with small landholdings; around 85 per cent of the farmers have small agricultural lands. But it is also unfounded to think that farmers’ conditions will deteriorate. The farmers in Medak district of Andhra Pradesh have been selling their products to Metro, the German wholesale brand, since 2003. They are happy to be rid of middlemen and glad to have ready customers. Therefore, both opponents and proponents need to debate the issue with an open mind. DW spoke to Dr Rajiv Kumar, Secretary General of the Federation of Indian Chambers of Commerce and Industry and former Director of the Indian Council for Research on International Economic Relations. We also discussed the issue with Devinder Sharma, a food and trade policy analyst.

DR RAJIV KUMAR// Foreign Direct Investment in retail means investment by foreign companies and multinationals, in the retail sector in India, either as single undertakings or in joint ventures with domestic partners. Actually they will have to team up with the Indian partners to build mega stores because only 49 per cent is allowed to foreign partners. FDI will assist in modernising the retail sector in India and help the sector keep pace with growth in the economy. This is the general benefit. The most specific benefit is that big retailers help to reduce the cost of all the products that they bring in, and therefore consumers have to pay a lower price. So there is a direct benefit to the consumers who also get a better shopping experience because of the increased choices in the stores. For the farmers, the benefit is that the big retailers do away with the intermediaries between them and the final consumer. This raises the price of products. With their removal, the farmers can get a better price and consumers pay a lower rate. Moreover, farmers will also benefit from newer varieties of products and technologies that the retailers will bring. This is what happened in the case of Pepsico. It gave newer technologies to farmers. Or in the case of farmers growing potatoes for McDonalds, who also have been given new technologies that have improved yields and, therefore, increased their income. And finally, the big retailers will also make investments in logistics, like transporting the goods from the farm gate to the final consumer without much waste. The airconditioned chain, trucks, warehouses — all of that will reduce wastage of agricultural products, which at the moment is about 30 per cent. Because of this reduction, extra products which in turn will get added in the market, will help food security. With the intermediaries eliminated, prices will be brought down and this will ease the food inflation. The opposition to the move is political. There is no logic behind the strident voices raised against it — it is simply opposition for the sake of opposition. The main resistance is also coming from the small retailers and intermediaries who think that the entry of the big retailers will cut into their profits and reduce their share in the market. This is only to be expected. But as we have tried to explain many times, while the share of the small retailers will go down, since the trade itself will expand rapidly, the overall size will not reduce. Perhaps the real opposition comes because a large part of the retail trade at the moment is in the cash economy, and will be transferred to the organised, bankable economy which will mean a big change for all concerned. The growth in the economy has to permit the entry of large retail stores. You already have Indian retailers like the Big Bazaar, Reliance Fresh, etc., operating in India. German brand Metro is already a player in the wholesale segment. The only difference will be that with Foreign Direct Investment this process will be accelerated and the growth process boosted. Without the FDI the Indian businessmen, who don’t have any experience in this process, will take time to mature. They will get there in any case; it’s only a matter of time. The attempt by small retailers, the mom-and-pop stores, to prevent the entry of large retailers or organisations is bound to fail. The Left parties demand that the government build its own stores without bringing in multinationals. The Left has used this argument to rule West Bengal for 35 years, and I don’t think I need to expand this point and explain any further. The government is not in the business of running retail stores. The government should be in the business of providing law and order, providing security, providing education, and organising healthcare and basic infrastructure. So, to argue that the government should be running retail stores, hotels and restaurants, is stupid. I am simply being honest about this. I am very optimistic and believe that this is an idea whose time has come. It cannot be stopped. Having said that, I don’t know when all this will become a reality — it is tough for me to predict. I do believe that people could be informed better about these reforms. There is no discussion on the need for reforms and about the benefits in any language other than English. That used to be sufficient some 20 years ago because the elite (who read English) were able to undertake the reforms. Now the reforms affect the lives of general people and because of information explosion, the masses are now better organised. We need to have this discussion in all the regional languages and in Hindi, otherwise awareness will not increase.

DEVINDER SHARMA// There is a misconception that this move will uplift the condition of the farmers. This is a failed model elsewhere and can’t be successful in India. If the idea is to just get involved because it involves big corporate houses, then I think such an idea is not in the larger interest of the country. If socialism or communism could not do any good to the world, then why replicate a failed model in such a big and complex country like India? The government is under tremendous pressure politically. The first head of the state to visit India after the 2009 elections was the British Prime Minister, followed by the heads of states of Germany, France, America, Canada and so on. And all of them have been pressurising India to open up the retail sector. The other thing which is little known in India is that the G20 has also, under an agreement at the last meeting in Toronto, made it mandatory for all member countries to open up to FDI in retail and remove all obstacles. At the same time, they are also to report the development to the International Monetary Fund (IMF), which is coordinating this process. India is one of those members of the G20 which has not been able to comply, so is under tremendous pressure. Unfortunately, the Indian government is preparing a fake analysis to justify the entry of FDI into India. That is why there was protest on this by the Opposition, some parties of the ruling alliance and the general public.Secondly, the argument that it will help in the development of agriculture is certainly not based on facts — it is based on biased studies done by the government to justify the move. Let’s try to analyse where it has been helpful, if at all. If you look at the original paper which has been produced by the department of Industrial Promotion and Policy and the subsequent studies done by the Indian Council for Research on International Economic Relations (ICRIER) and so on, these are basically faulty studies. Let me question a couple of assertions. The first is that it will create employment. Walmart is the world’s biggest retail company now and its total turnover is around $420 bn; it employs 20 lakh people. In India, ironically, the total turnover of the retail industry is also about $420 bn. There are 120 mn shops and it employs 40 million people. Now the question is, how will they create more jobs by destroying such a big market and rendering so many people useless? When you look at British firms like Sainsbury’s and others, they were supposed to create 24,000 jobs between themselves in the last two years, which is what they promised to the government. Instead, they have actually offloaded 820 people. So if they have not created jobs in the UK, how can you think that they can come and create employment for us? So the employment creation has to be seen in the light of how many jobs are being displaced. In the final analysis there would be more victims and less survivors. The other argument is that this will help farmers get a better price. This is again a flawed thesis based on wrong analysis. When you talk about farmers’ welfare people think, “why oppose it?” But look at America — the birthplace of Walmart and grooming ground for Tesco and other big retailers. In America, the farmers definitely benefited because on the one hand you have Walmart and on the other hand you have the commodity exchanges. Commodity trading is a popular practice there. Despite all this, USA is providing farm subsidies, which include direct income support to farmers. A recent study shows that if the Green Box subsidies or farm subsidies are withdrawn in America, there would be a fall of 42 to 45 per cent in agricultural production. So is the income of farmers going up because of Walmart or because of factors like commodity trading and subsidies? In the past five years the American government has pumped in more than $300 bn in subsidies. In Europe, too, despite the presence of all these multinational retailers, governments provide huge agricultural subsidies. And even then one farmer quits agriculture every minute there. If you look at the Latin American countries, where over 65 per cent of the retail industry is in the hands of FDI, a large number of farmers are being forced to leave agriculture. So what kind of model are we bringing to India? The third argument is that it will help in removing middlemen, and therefore, provide more income to farmers. But look at things in perspective. If Walmart, for instance, is really squeezing out the middleman, it is also becoming one. It is not a consumer, it is a retail giant and the definition of middle-man is somebody who is between the producer and the consumer. The only difference is that it is a very big middleman and it keeps small middlemen out of the process. The impression we have in India is that the traditional middleman is somebody who gobbles up lots of profit. This is true. But with multinationals come a battery of other people which include the standardiser, the quality controller, the processor, the retailer, the packaging man and so on. That is why a number of studies show that in America the farm income has come down over the years, since the number of middlemen actually multiplies when the supermarket comes into a country. So where is the advatage? Allowing FDI in retail is going to be suicidal for Indian agriculture. Nowadays anything that comes with bags of money is an idea whose time has come. Business bodies are not concerned with national interest — their only motive is profit. They are concerned about their own collaborations and joint agreements. According to a disclosure, Walmart alone invested `52 crore between 2007-2009 in India on lobbying. That money has gone somewhere. The revelation is only about the money spent by Walmart; what about the expenses by the other 10 big retail giants? This is a passing phase where all political parties’ popular agenda is driven by corporate interests. But it will be tragic if we allow this because we are actually destroying our own capabilities and letting things go into the hands of foreign companies which will repack the profits to their own countries. It is basically a system of recolonisation of the country. I think we need to improve infrastructure and provide farm incomes. To borrow these failed models and then think that we are trying to help Indian farmers is not going to help them.

HIDE DESIGN It’s love of leather, not business, that shapes Hidesign’s success story, says Dilip Kapur

I was born in New Delhi to a post- Partition refugee family. But my parents soon moved to Agra where my father set up a shoe factory and stores. Obviously the love for leather is genetic! We moved to Puducherry when I was six. The reason was the Auroville Ashram. My parents sold every asset — factory and stores — and donated the money to the ashram. I loved the ashram school. Its free schooling system allowed me to do what I liked and I think it gave me my defining characteristics: curiosity and search for individual growth and identity. The system was the philosophy of the Mother and a Frenchman called Pavitra, who have influenced me profoundly. The school also defined my sense of beauty: our notebooks had a motto etched on the cover, “There is great beauty in simplicity”. The clean lines of Hidesign come from there. The love for beauty must also be from my mother who loved to paint and was known as the finest embroiderer in the ashram. And I absolutely loved the sea. Swimming in the ocean and playing on the beach would be among my greatest pleasures in life! My first full-time job was when I was finishing my PhD in international affairs. Running out of scholarship money to complete my dissertation, I took on the first job that paid enough to take me through the nine months it took to finish. It was a job in a leather goods company where I learnt to hand-dye, cut and glue leather together and make a bag out of it. The intellectual in me loved working with my hands. But what was getting shaped was my lifetime affair with leather. When I returned to India, I kept making bags as a hobby, never realising that this would end up being the focus of my working life in a few years as it grew into what is now Hidesign. It started off with one artisan. We made one bag a day. The first bags I designed and made were gifted to my family. Through a friend of mine, a German man saw my creations and ordered 1,400 bags. I had just started this and had one cobbler working for me. After six months, I managed to supply just 200 bags. Around that time a friend who was staying at Auroville returned to Australia to work in a car factory. When he broke his back, he got $12,000 from his company. He came back, bought my bags, and sold them in Australia. He was quite successful and that was how we reached Australia. One of his cousins living in England saw my bags and was impressed. She started buying them for the UK market. Then, somebody who visited Auroville from California saw my bags and started selling them there. Interestingly, I didn’t see what I was doing as ‘business’ the first 10 years. I couldn’t even read my PnL accounts! We just enjoyed what we were doing and that’s pretty much how we operate even today. We never feel we are even close to having ‘achieved’ a goal. Being an entrepreneur is only one aspect of what I would want. I still teach in Auroville, I would still like to continue to learn (thoroughly enjoying learning how to draw right now), be involved in the community at Auroville and Puducherry (heritage especially). On the way there were several peaks and troughs. My lows have been more psychological. Twice I came close to giving up Hidesign. First time was in 1985, when it was going from becoming a hobby into a business. I didn’t want to become a businessman and even thought of giving up the hobby. Then again in 2000, just before I started selling in India. India was starting retail. I found it exciting to be in touch with the final person who was using my product. Since I have not studied business, my approach is more instinctive. I work on short-term goals and have learnt, over and over again, that being unique and innovative is the greatest strength. Think through problems and don’t just take the easy route. From the time when I designed our first handbag — Toscana — till date I play close attention to every aspect of the creative and operational process. Even with a strong design team it is tough to come up with a collection that is new and relevant every season. Hidesign’s future lies in becoming a self-confident brand with its own unique identity. One that learns to relate to people of different cultures and heritage across the world. My son Vikas Kapur has joined us, but I see the future of Hidesign as being in the hands of anyone who is committed to it and talented enough to drive it. There are a few that I have my eyes on within the organisation.

I Wish I Could Be

Who else would I like to be? I am quite comfortable in my skin. If I change the question to who I admire, I would say anyone who has successfully bettered lives through their innovative thinking. Could be a Nelson Mandela, Ho Chi Minh, Steve Jobs — the list of supermen is actually quite long. That’s comforting to note. (As told to Rohini Banerjee)

A big birthday as the capital city celebrates a re-emergence

INDIA HASN’T really known quite how to mark the first centenary of the founding of its modern capital city, Delhi, by the British in 1911. It is not quite politically correct to celebrate things done by former colonial masters, even though many of the country’s elite continue to polish their English accents, and relish their links with long-dethroned maharajas and lesser royal families. Times change of course. India is no longer a struggling underdeveloped nation but an internationally recognised economic power, albeit with many problems of under-development. Britain on the other hand, no longer rules the waves and has become an island of declining economic and political importance, located geographically and emotionally offshore from the European continent. Rather like India’s old maharajas, it still carries some clout internationally, even though its current Prime Minister, David Cameron, likes rather obsequiously to underplay its importance when on foreign visits. Strong ties remain between the two countries, strengthened by the councommon language of English that has become Britain’s most enduring worldwide colonial legacy. The young flock to the US for university education and most parents aspire for their children to become Harvard graduates and US investment bankers, rather than British equivalents. But the UK is more accessible, and it has become fashionable for the rich to have a flat in London, especially in Mayfair where businessmen such as Anil Agarwal of Vedanta and Subrata Roy of Sahara have set up kudosseeking camps — Agarwal by buying a palatial former Rothschild’s house and Roy by buying the Grosvenor House Hotel. But India still could not be expected to celebrate a British century so, after much debate and procrastination, it was eventually decided early last year to mark not the anniversary of King George’s mela, but the historical ‘re-emergence’ 100 years ago of Delhi as the capital. Re-emergence of course was a neat word, making the celebrations a sly dig at the British who had earlier moved the capital from Delhi to Calcutta in the late 18th century. Last month, I drove to Coronation Park in the north-eastern outskirts of the capital, where statues of King George and other dignitaries were dumped on brick plinths in the 1960s by a government that was unsure what to do with these embarrassing relics of a not-sodistant past. Totalitarian regimes such as the Soviet Union and China (plus the US more recently in Iraq) demolish such statues, but the world’s largest democracy has been more self-consciously caring, and instead of carting King George’s statue off from the India Gate canopy on Raj Path to a stone breakers yard, planted him along with his peers in the distant park. The forsaken location was an apt choice for the statues — not only was it largely hidden from view, but it was also the site of three imperial British durbars. The third of these huge celebrations of colonial pomp and power was the one in 1911, when King George visited the councommon try with his wife, Queen Mary, to mark his coronation a few months earlier. Addressing some 100,000 spectators of varying grandeur on December 12, he announced the new capital, which was eventually built in the 1920s and 1930s. While Delhi was growing into a conurbation of approaching 20 mn people, grass grew around the crumbling imperial monuments, encircled (as I discovered when I last went there a decade or so ago) by a wall and rusty gate with a padlock that a bored attendant would sometimes open to curious (usually British) visitors. Several statues vanished, leaving topless plinths that added to the desolate symbolism. Some went to welcoming destinations in the UK, Ireland and Australia — Rufus Daniel Isaacs, the first Marquis of Reading and a Viceroy in the 1920s, for example now stands in the English town of Reading where he was taken by his family. At the park last month, I found 200 or so labourers shifting earth and chipping stone walkways to mark the re-emergence’ anniversary with new ornamental gardens. King George’s statue, and a ceremonial column with a plaque that he unveiled in 1911 to mark his coronation a few months earlier, will be the notable features at the revived park along with four other remaining British statues. Conservators have sometimes tried to clean up the site in the past, and eventually Delhi authorities agreed that the park should be renovated and expanded, and that is what is now happening, with the main part due for completion in August. “It doesn’t matter if it was the Moguls or the British. We are interested in conserving history and we can’t not do it just because it’s King George the Fifth”, says A.G. Krishna Menon, who heads the Delhi branch of INTACH, the conservation organisation that is running the work with Delhi authorities. The Delhi of today is a proud city of immigrants, notably people who fled from Pakistan after Independence in 1947, and who have turned it into a major business centre as well as a seat of government. Now it is a home of millions who throng here for work, especially from the poorer states of Bihar and Uttar Pradesh, as well as multi-national companies and others that have helped build the chaotic under-resourced satellite city of Gurgaon and the neater satellite of Noida. It is a city of energy, vibrancy, resourcefulness and skills — all more evident in old Delhi than the wide and elegant but rather antisocial Lutyens bungalow zone of the 20th century city. And it has a rapidly growing and efficient metro railway. But there is also worsening pollution, corruption, illegally dangerous buildings, poverty and the brash selfishness of the newly rich. But though often condemned by its residents, with the best-off usually saying they would prefer to live somewhere else, it is a place that people always come to with hopes and dreams, and that will continue, as will the links with the British. The views expressed in this column are of the author alone.