Viswanathan K's Thoughts

In India, a very tiny fraction of the population pays taxes. But if you look at its GDP per capita, then India is not an outlier, writes Karthik Muralidharan in Accelerating India’s Development . In simple terms, that means poorer countries tend to have a low tax paying base. Conversely, more people pay taxes in richer countries. It may be hard to believe but: “Our revenue collection is in line with global and historical benchmarks.”   But why is tax base related to the richness or poverty of a country? “These patterns reflect greater formalization of the economy in richer countries.” The good news is that as poorer countries get better off, their tax base increases (this is a historical trend). One reason for this is that the administrative capability to tax increases as a country grows richer.   Further, the richer a country grows, the more the government can do (it has more money, after all). And the more the government does, the more the number who are will...

Harish Mehta writes the story of the Indian IT industry in The Maverick Effect . In the beginning, the common problems of the industry were far too many and seemingly insurmountable.   Back then, brand India was a major problem. We were still considered a dirt poor country of snake charmers. Socialist. License raj. Pathetic product quality. “Against the backdrop of a poor nation on the brink (of bankruptcy), Indians were standing in American boardrooms, making lofty promises to help them conquer their most complex, technological challenges.” No wonder the pitches rarely succeeded in winning any projects. Even worse: “How to you help a nation-wide scatter of companies that suffer from the West’s reluctance to put ‘India’ and ‘software’ in the same sentence?”   The answer came in the form of a problem that nobody in the West wanted to work on. Yes, the Y2K problem (Older computer system stored the year in 2 digits. Come the year 2000, the last 2 digits of the curre...

The biggest problem in how the government spends money is not corruption. Instead, it is inefficiency – the spending of money on the wrong things, writes Karthik Muralidharan in Accelerating India’s Development .   For example, 50% of public spending is tied to salaries, pensions and interest payments. That leaves only 50% to spend on providing real services to the people. Even within that 50%, less is spent on investments (roads, schools etc) that boost future productivity. Instead, more is spent on subsidies .   Muralidharan acknowledges that welfare schemes must exist, but they need better targeting . Both inclusion and exclusion errors (including the wrong people and excluding some of the right people) need to be reduced. (A broader definition of inclusion error includes not differentiating rich and poor farmers.)   Another problem is leakage . It refers not just to corruption, but also over-invoicing (billing for non-existent individuals) and under-pay...

Why does America have such a long period (2 months) before the winner of an election takes over as the President? No other democracy has such a ridiculously long transition period. This could be dismissed as an American quirk, except when you see what has happened in the Ukraine war since Trump won.   Biden gave Ukraine the “green light for Ukraine to strike Russia with US-made long-range missiles”. This is very dangerous for obvious reasons. How would Russia respond if an American missile launched by Ukraine hit deep inside Russia? Will UK and France follow (or be forced to follow) the American policy and authorize Ukraine to use their missiles to hit inside Russia? Would Russia decide to strike a European manufacturer of missiles in such a scenario? Would NATO then be forced to declare war on Russia? Would nukes come into play?   You’d think Biden’s team would cite a good reason why they have set things off on such a dangerous and unpredictable trajectory when he is...

Government salaries are too high. On average. Thought not all are overpaid, top government officials are severely underpaid compared to their private sector peers. Such high salaries (on average) creates multiple problems, explains Karthik Muralidharan in Accelerating India’s Development .   A lot of people try to get a government job desperately. Such demand invites corruption in hiring. In addition, since the attraction of government jobs is so much (higher pay + job security + pension), a lot of people take any government job they can land. Regardless of their area of expertise or interest. Since many of these jobs have some minimum qualification, it leads to the sprouting of colleges to fulfil the need for a degree. The poor quality, and disconnect from employability of such colleges is of no concern even to the student because they view that degree as the minimum qualification to land a government job.   With the ratio of applicants to government jobs so low, ...

This blog is based on two interesting titbits from Harish Mehta’s The Maverick Effect . ~~   A surprising cameo in the NASSCOM story is the actor, Shammi Kapoor. Even though he was in his 70’s, he was connecting to the Internet (long before the Internet took off in India) to access world news. “He was an Internet enthusiast with an incredibly curious mind. He took to new technologies like a fish to water.” NASSCOM tried to enlist him to pitch the benefits of the Internet in India to bureaucrats and policy makers in government. He agreed to do it. For free. His celebrity status was a big attraction. He spoke passionately of the world it could open up, how he connected to his kids abroad via the Internet. “His personality and presentation skills helped us communicate the potential of the Internet to even bureaucrats.” ~~   In the 80’s and 90’s, there was the huge problem of terribly slow data links from the West to India. Even the laughably slow 64 kbps link co...

NASSCOM (National Association of Software and Service Companies) is a trade association. It started by serving the needs of the still-in-infancy software companies, but has expanded to include BPO’s, R&D centers, and startups. “(NASSCOM is) India Inc brand builder, a think tank, a lobbyist group, an interventionist or more.”   This may sound like a reviled lobbying and backroom dealing entity, but as Harish Mehta writes in The Maverick Effect , back in 1988 (when NASSCOM was founded), it was a necessity. “NASSCOM was incubated at a time when it was an uphill battle to even get software recognized as a tangible product or a service, and something different from computer hardware.” Hard to even imagine such a confusion today…   Back then, the Indian body representing software companies was really a body for computer hardware companies, MAIT. MAIT treated software as the poor cousin. Mehta and a few others wondered if the only way was to form a dedicated body to...

In Accelerating India’s Development , Karthik Muralidharan says: “The centrality of data for governance is seen by noting that the very origin of the word ‘statistics’ comes from its crucial role in managing the affairs of the state.” But India’s data systems are outdated. They are designed to track national progress, not for supporting day to day governance. The focus is on measuring visible inputs (how many schools?) rather than harder to measure outcomes (quality of education). The actual citizen’s experience is barely measured (was the service easy or convenient?).   Even worse, any data that is gathered is by the respective departments themselves. Who have a vested interest in making themselves look good. And who may not have the right data analysis or statistical skills anyway.   The lack of investment in our measurement infrastructure thus has many consequences: (1) money is spent on the wrong policies, (2) a focus on easily measured inputs instead of ha...

Is India’s population still growing? Or does the answer vary drastically across its states? This blog is not about the political (and therefore emotional) connection of those questions to the topic of delimitation. Instead, it is about the at-times surprising answers to the questions, without the political and moralising aspects .   Rukmini S’s post presents the data on this superbly. Even without China or Sanjay Gandhi-like birth control measures, the following has happened. “There was certainly a time when India's population was growing very fast. In the three decades after Independence, India's population had doubled. But from the 1980s, population growth began to slow down.” Today, India’s population growth rate is below the global average !   Unintuitively, all states are slowing , though they slow at different rates : “Until the 1970s, population growth rates in different states were quite similar. However, since the 1980s, India's southern states have...

How do we define ourselves, asks Gurwinder Bhogal? Sure, we have internal drivers and ideas, but we also temper that with feedback from others. Are we overdoing it? Is it acceptable? Are we fitting in or becoming outcasts? This approach made sense since time immemorial when the feedback we got was from a small set of people with whom we interacted regularly.   But in the age of the Internet and social media, that approach is not working, argues Bhogal. We now get feedback from people we barely know. Even the famous people we listen to online, well, what they say online may not be “indicative of who they are”.   Who doesn’t like to be popular? But popularity online carries a new risk: “They often find that their more outlandish behavior receives the most attention and approval, which leads them to recalibrate their personalities according to far more extreme social cues than those they'd receive in real life. In doing this they exaggerate the more idiosyncratic facet...

In his book, Accelerating India’s Development , Karthik Muralidharan looks at the role of bureaucrats in India’s poor public service systems. As mentioned in earlier blogs, democracy forces politicians to over-promise. To deliver on those promises, they need a capable bureaucratic system. To improve the bureaucracy, investments have to be made. But we are a poor country – so there isn’t enough money to invest. Even worse, any investments in improving the bureaucracy will take a long time to translate into visible actions, but a politician’s re-election cycle comes within 5 years, why then would a politician invest in the bureaucracy?   In addition, politicians want to have pliable bureaucrats who will do their bidding. So they have actively undermined the professionalism and capability of the bureaucracy.   A lesser-known fact is that the Indian bureaucracy is understaffed . Not a typo. As a ratio of public servants to the population, India’s ratio is lower than China’...

So the American pre-polls were totally wrong. The race didn’t turn out to be “too close to call”. Instead, as Andrew Sullivan wrote: “It’s not just a Trump victory. It’s a Trump triumph.” How does he come to that conclusion? “There is, yes, a mandate. When one party wins the presidency, Senate, and probably the House, that’s usually the case.” Mandate for what? This one is easy to answer because Trump had easy to understand policy goals, unlike his opponent who seemed to have none. “Americans have voted for much tighter control of immigration, fewer wars, more protectionism, lower taxes, and an emphatic repudiation of identity politics.”   Wait, surely that last point (“an emphatic repudiation of identity politics”) can’t be true? Wasn’t Trump “whiteness personified”, as one political commentator said? Well, that’s not what the data says. Sullivan pulls up some of the relevant stats: (1) Trump won more non-white votes than any Republican since Nixon; (2) He gained m...

The West increasingly sees AI as a dangerous thing, something that is/will be used for bad things, lead to job losses and social upheaval. The extreme versions of such fears involve Terminator like scenarios where AI takes over the world.   On the other hand, India views AI as a means to solve societal problems and gaps for which the country (and thus its government) is too poor to solve. The history of how other countries solved these in the past is often proving irrelevant, like how India achieved huge telecom penetration by bypassing copper wires (history) to wireless (modern and a lot cheaper). AI is like that – it opens the door to find patterns. The Internet in general and the world of sensors that is increasingly integrated with the Internet produces voluminous data on just about everything. How longs are trucks idling at checkpoints? How long does it take for goods to move from A to B? Crunching so much unstructured data is beyond human or conventional software. AI, on...

How do advertisements work, asks Kevin Simler. The conventional theory says that ads create a positive association with the product in hand (love, happiness, attractiveness), and that association eventually nudges us into buying it.   But is that true? If it were, Simler says: “All an advertiser needs to do is show a pretty face next to Product X, and suddenly we're filled with desire for it.” Obviously, things aren’t that simple. While we aren’t perfectly rational: “Neither are we puppets at the mercy of every Tom, Dick, and Harry with a billboard.”   How then do ads work? His theories make for interesting reading. Some ads work by just creating awareness (FYI) that a certain product exists e.g. Fevicol. If that info can be provided in a memorable way, all the better. This approach works for products which are needed infrequently – the aim of the ad is to try and ensure you recall the brand when you do need such a product. Other ads work by trying to give you...

Karthik Muralidharan looks at the role of politicians in the poor state of India’s governance and delivery systems in his book, Accelerating India’s Development . Again, the situation is more complex than what most believe, which is why the title of that chapter is “The Politician’s Predicament”.   To reiterate the point from an earlier blog, India’s choice of “democracy before development” has created unique “political incentives and constraints”. Voters in India can demand welfare and subsidies when India is much weaker, both economically and in government capability. (Remember, the West progressively expanded democracy as it got richer, so by the time the poor started demanding more things via the ballot box, the state had more money and capability). Sadly: “Weak state capacity contributes to vote bank politics.” How? When the state can’t deliver to all, well, it can deliver only some things to some people. In a country where most people lack the most basic of ameniti...

Most of us never learnt Western history from a social perspective – how, for example, did the Western welfare state emerge? Prof. Karthik Muralidharan looks into that in his book, Accelerating India’s Development .   Long, long ago, Western governments monarchies were about one thing only – security. After all, it was a time when your neighbor could attack, defeat, loot and occupy you, and enslave or kill your inhabitants. Those were savage times.   The role of the Western state changed only with the Industrial Revolution. As production increased phenomenally, better systems were needed. Roads, ports, railways initially.   As urbanization followed industrialization (people migrated for better paying jobs from the villages), the populations of towns exploded. Sanitation and sewage systems had to be improved. These improvements in turn boosted productivity and the state’s tax revenue, which could further improve infrastructure (and yes, continue to fund the militar...