Archive for November, 2016

19 Nov

Money…the root of all evil

Posted by vramani in government, irony, political economy, public affairs, public policy. Tagged: , , , , .

“For the love of money is the root of all evil”
(Timothy 6:10, The Bible, King James Version)

The Bible makes it clear that it is not the medium which is evil but the inordinate attraction to it. Before we castigate that poor banknote or coin, let us also reflect that greed is only one of the human failings, on par with envy, fear, lust and anger. And yet, the action of the government of the day to render worthless ₹ 500 and ₹ 1000 denomination notes at the drop of a Prime Minister’s speech has left the common citizen speechless and in the grip of a welter of emotions. The intentions may be good and the purpose may be noble : there is a groundswell of support today for the government’s actions among the chattering classes, even though the silent masses are going through difficult times. But is “black money” so easily tamed? Since there seems to be popular misconceptions about “black money”, its origins and nature, some clarifications are in order.
Black money can refer to a flow or to a stock. It is the activity through which the money is generated which determines whether it is black or white, while the subsequent use of the money determines its colour at that time. For example, a private engineering college accepts a donation in cash from a student and declares only 25% of the amount as received. The remaining 75%, which is held in cash, or converted to other assets (and not declared as income), constitutes black money. If this money is used to pay cash salaries to the college employees, the money gets converted from black to white, since the employees use it for their legitimate monthly expenses. Similarly, undisclosed “black money” income parked abroad (as stock) is converted to a “white money” flow when it legally reenters India as foreign institutional investment from foreign tax havens. The roots of black money can lie where activities are wholly illegal (smuggling, drug dealing, arms transactions), or where the activity is legal, but part or whole of the amount realised is not disclosed, either because there has been some violation of permissible limits (illegal mining, capitation fees) or simply to avoid tax payments of any kind. The mythical metaphor could be Ravana’s ten heads in the Ramayana or the Lernaean Hydra in Greek mythology: chopping off one head would see more heads grow back again. A modern day analogy would be the Jackal, the terrorist tasked with the assassination of President Charles De Gaulle of France. With his multiple stolen passports and the ability to change his appearance to suit the passport photograph, the Jackal evaded stringent police surveillance and was finally stopped in his tracks by a patient, persevering French policeman only after he had managed to take a crack at his target. Black money is similar: just when the enforcement agencies think they have got the beast, it will reappear in a new form elsewhere.

In these days of highly fungible economies, the very processes of economic and government functioning give immense scope for the generation of black money. Since I started this article with a quote from the Bible, it would be appropriate to list the Ten Commandments that the Government of India must follow if the current demonetization drive is to come anywhere near yielding the desired results:
I. Thou shalt make bank accounts mandatory and easily accessible
The innovative idea of the Pradhan Mantri Jan Dhan Yojana (PMJDY) to provide every Indian citizen with a bank account has seen as many as 254 million accounts being opened till November 2016. By the government’s own figures (gathered from banks), nearly 25% of these accounts have zero balance; there is an average of about ₹ 2500 in the remaining accounts. The geographical spread of these accounts would be highly skewed: remote tribal and rural areas are likely to be underserved. It is the poor with no access to bank accounts who have been hardest hit by the demonetization exercise. The significant percentage of zero balance bank accounts is testimony to the fact that bank accounts are still not perceived as useful by the poor, especially where they have little bankable surplus and where bank locations and timings are such that they cannot easily be accessed. Making the opening of a bank account by every citizen above the age of 18 mandatory would popularise the use of banking services and compel hitherto reluctant bankers to actively seek customers. There will still be areas where access to bank branches is difficult, either because of geographical location or, more often, because of timings which do not suit the customer. It is here that the Second Commandment comes into play.
II. Thou shalt actively promote the cashless economy through the use of technology
Mobile wallets and payments through mobile phones and computers using internet and wireless technology can obviate the need to visit banks. Use of point of sale (POS) terminals at all transaction outlets would promote cashless transactions. Money transfers (salaries, etc.) can be done online or using mobile phones. Banking correspondents can ensure needed cash payments from and deposits to customers’ bank accounts. This will need some knowledge of how to use these systems. Having seen how quickly nearly 900 million Indians have mastered the use of mobile phone software, including the use of WhatsApp and the downloading of videos, I do not foresee any problems of adapting to modern technology. There is, of course, still the need to ensure that the temptation to escape the electronic trail is checked…enter the Third Commandment.
III. Thou shalt declare illegal and void any cash transaction exceeding ₹ 10000
Given the Indian propensity for jugaad, all efforts will still be made to evade scrutiny of economic intelligence agencies by going in for over and under the counter cash payments, to avoid payment of direct and indirect taxes. Black money will be converted into holdings in real estate and gold/jewelry. To ensure a clear electronic trail of all transactions, any cash transaction over ₹ 10000 should be made illegal and liable for punitive action, including confiscation. This will also, hopefully, check the widespread and pernicious practice in India of large-scale cash transfers in real estate dealings to evade payment of capital gains tax, stamp duty, registration fees and other related levies.
IV. Thou shalt demonetize ₹ 2000 and ₹ 500 notes
The rationale for introducing ₹ 2000 notes when the lesser denomination of ₹ 1000 has been scrapped has raised many eyebrows: suitcase payments become easier when the number of currency notes required to be packed into the suitcase are reduced by 50%. A strong case can be made for scrapping all currency notes of a denomination greater than ₹ 100. In fact, there is growing support from American economists for withdrawing from circulation the 100 dollar bill which, they feel, helps only drug dealers, terrorists and illicit activities while rarely being used for transactions. India may not be quite in the same cashless economy boat as the USA, but moving the economy in the cashless direction requires demonetization of ₹ 500 and ₹ 2000 currency notes. The presence of currency in only small denominations from ₹ 1 to ₹ 100 would force reluctant merchants to go in for cashless technology. It would also render more difficult the task of using low denomination currency notes in large numbers for high value transactions.
V. Thou shalt make Aadhaar and PAN card details mandatory for all transactions above ₹ 10000
Despite the objections of neo-Luddites opposed to the universal deployment of the Aadhaar card for all, it is heartening that, for schemes like the LPG subsidy transfer, Aadhaar cards are being linked to bank accounts. Since opening a bank account does not require either Aadhaar card registration or PAN card details, there is every scope for diversion of unaccounted for income to benami accounts. What is urgently required is to link Aadhaar and PAN card details and to make PAN details mandatory for any transaction exceeding ₹ 10000. This would check possible misuse of bank accounts which are not on the income tax radar (due to non-availability of PAN details) and would also ensure that non-income taxpayers (like agriculturists) are not used as conduits for undisclosed payments.
VI. Thou shalt discontinue top-level political decisions in all discretionary matters
A major scope for corruption lies in the centralization of decision making powers at the political apex, especially in state governments and local bodies. Whether it is the posting of officers, the permission to start primary schools or the award of contracts for anything from chalk pieces to supplementary nutrition for children to major constructions, the ministerial seal of approval is a must. This has spawned a major corruption industry which enmeshes a significant portion of the bureaucracy as well. We are also often regaled with stories of the MLA or local body corporator who becomes a multimillionaire within a year or two of getting elected. The standard defence is that elections are a costly business, although how that justifies corruption is beyond one’s comprehension. Be that as it may, there is no denying that, apart from lowering administrative efficiency and providing substandard services to the aam aurat/aadmi, high-level political corruption is a significant source of black money, often ploughed back into real estate and conspicuous consumption. Since this is a disease that cuts across political boundaries and is particularly common at state and local government levels, the Government of India must, through a combination of incentives and shaming, compel governments to restructure their governance processes and decentralize decision making powers.
VII. Thou shalt implement a sound public procurement policy
The Government of India had introduced a Public Procurement Bill in 2012 to regulate and ensure transparency in procurement by the central government and its entities. The bill was allowed to lapse and there have been no efforts subsequently to resuscitate it. Most state governments have no public procurement policy or legislation in place. Even in the few states where such legislation has been passed, its effectiveness has never been assessed. Since, apart from administrative postings and patronage in resource allocation, public procurement is the greatest source of political and bureaucratic corruption, some urgent action on this front is essential to check amassing of illegal wealth by the politician-bureaucrat-businessman trinity.
VIII. Thou shalt eliminate the inspector raj through online processes
The permit-license raj was curtailed in 1991; unfortunately, the then government lost steam before the death blow could be delivered to the inspector raj. There are still too many ‘inspectors’ in local bodies, police, road transport, liquor licensing, education, industry and labour welfare, whose major function appears to be the collection of economic rent, for themselves and those above them in the government hierarchy. Some streamlining of licensing processes has taken place but the overall picture is still one where the inspector-tout system flourishes: just visit any Regional Transport Office and see for yourself. This corruption has two “black money” aspects: firstly, the unlawful gains to the organs of the state and, secondly and more dangerously, the operation of a parallel economy that can threaten national security and financial stability. Technology is, again, the only answer. As more processes go online, self-certification by licensees and only minimal, essential contact with the human element can help reduce corruption and harassment.
IX. Thou shalt streamline the justice system to deliver just deserts promptly to all bribe-takers, bribe-givers, tax evaders and hawala traders
As an American jurist put it “The millstones of justice turn exceedingly slow, but grind exceedingly fine”. Justice in India often seems inordinately long in coming. It is rather ironic that, in recent times, a public prosecutor of Indian origin investigated and secured the conviction of two well-known individuals of Indian origin on charges of insider trading in a matter of four years in the USA. While we may not all support his approach, it is a fact that high profile cases involving top political and bureaucratic functionaries in the previous central government are still far from closure even in the trial court. Lengthy, tortuous legal processes not only breed cynicism in the populace at large (not a healthy sign for a democracy) but also embolden lawbreakers with political and economic clout. Sincere and speedy implementation of the provisions of the Benami Transactions (Prohibition) Act, Prevention of Money Laundering Act, Prevention of Corruption Act and related legislation will show that the government means business. Along with the government, the judiciary also needs to tighten its processes and dispense justice fairly and speedily.
X. Thou shalt ensure that all elections are funded only through legal contributions and that all transactions relating to elections are closely monitored
The final Commandment covers a subject which is at the foundation of the efforts to tackle the genesis of black money: electoral corruption. Election funding is itself a small portion of the black money generated. But the politician-businessman nexus that unaccounted election funding sustains has deleterious long-term implications for the economy as well as for the credibility of democracy in the eyes of the people. There are politicians who proudly claim that they have never enriched themselves personally but have taken money only for their political party. Political parties have never been required to account for the sources of their funds and have stubbornly resisted efforts to bring them within the ambit of the Right To Information Act. Demonetization should bring about a situation where all receipts and all expenditures, small or big, by parties and their candidates can be electronically tracked. This will give the Election Expenditure Observers far more teeth than they have at present. With rigorous monitoring of electoral expenses, the last fig leaf for justifying corruption before, during and after elections will be gone.

I write this piece at a time when the nation is probably going through one of its greatest phases of turmoil since independence, rivalled only by the churning of the polity in the closing months of the Emergency in 1977. As one who lived for over a decade in the vicinity of Muhammad Bin Tughlaq’s aborted capital of Daulatabad, his other aborted experiment with currency comes to my mind. Of course, 2016 is not 1333 and we are not minting brass and copper coins, though the flimsy quality of the Rs. 2000 currency note makes me slightly apprehensive. There will always be insinuations that raw political calculations dictated the demonetization decision. The current pains that large sections of the population are going through could have been mitigated somewhat if some of the Ten Commandments had been implemented prior to the “surgical strike” on the currency. As matters now stand, systemic changes on the lines suggested above would give the government some victories on the black money front in the months and years to come. Human greed will remain, the craze for conspicuous consumption and the Big Fat Indian Wedding will continue unabated and the Cayman Islands and other tax havens will always beckon those with an insatiable appetite for moolah. But the government would at least have the satisfaction that it made earning a fast buck that much tougher for those who are never going to respect the rule of law, while also ensuring that it does not make the wretched life of the common (wo)man even more wretched.

10 Nov

Palghar – lessons for Maharashtra (and other states)

Posted by vramani in government, health & nutrition, public policy. Tagged: , , , .

It was that time of the year again…the rains came and, with them, the sense of déjà vu that stories of child deaths in tribal areas of Maharashtra evoke in the public mind. The procession seems endless: Melghat in the 1990s, then Nandurbar in the first decade of this century and now Palghar in the second decade of the twenty first century. The political and administrative actors have changed in the intervening years, economic and social changes have taken place in town and countryside but the same problem seems to return to haunt us with a recurring, almost numbing regularity. Opposition politicians (who seem to forget that they were in power for a decade and a half till very recently) are ready with their criticism of the first two years of the present ruling dispensation. The usual knee-jerk reactions are on full display, with Ministers of the concerned departments undertaking flying visits to the affected areas and attempts being made to rope in the medical fraternity, nonprofits and civil society to tackle the problem. Unfortunately, there is no well thought out strategy to tackle the problem of child malnutrition on a long-term basis, whether it be in Maharashtra or in any other state in India. It might, therefore, be apposite to outline what should not be the focus of public policy in the immediate future — both short and medium-term — and what strategy could yield handsome dividends in the next few years.

What is definitely a losing proposition is the obsessive focus on the centralised supply of nutrition to affected mothers and children. There seems to be a misconceived notion (at various levels of government, nonprofits and civil society) that augmenting supplementary nutrition to mothers and children through the existing channels of the Integrated Child Development Services (ICDS) system will help matters. The past (and more recent) history of state-directed and centralised nutrition provision through the ICDS system has been controversial, with repeated attempts (across many states) to circumvent the Supreme Court-directed policy of empowering local communities and families to meet the nutrition requirements of their mothers and children. The experience, over the last one year, of the Abdul Kalam Amrut Aahar Yojana in Maharashtra, aimed at providing one hot cooked meal to pregnant mothers and to nursing mothers in the first three months after delivery, has not been very heartening either, given the less than enthusiastic involvement of the ICDS machinery and the glitches in timely fund allocation to local committees tasked with provision of the nutritious meal. Since the National Food Security Act, 2013 has mandated a cash maternity entitlement of Rs. 6000 to mothers, in addition to access to food supplies through the Public Distribution System and through specific nutrition programmes for pregnant and nursing mothers, the possibility of cash transfer of the entire entitlement to women through Aadhaar-linked bank accounts needs to be closely looked at. This would not only check programme leakages but also reduce wasteful expenditure on overheads on state-run programmes. However, this requires a separate study, so the issue will not be further pursued here.

Reducing chronic malnutrition in under-5 (“U5”) children is a process that involves factors like accelerated economic development and the behavioural changes that rising income levels bring. But, rather than passively waiting for economic development to reduce child malnutrition, governments (and their extensive machineries) can take proactive steps in the short-term to reduce acute malnutrition (and the accompanying mortality) in U5 children. This article focuses on these measures.

The first step is the use of real-time, accurate data, based on anthropomorphic indicators, to get a grip on the exact geographical regions (going right down to every individual anganwadi) where child malnutrition levels are highest, be they remote tribal hamlets or congested urban slums. Currently, monthly recording of weight for age (based on the WHO growth norms) is the only criterion used to assess child undernutrition in the ICDS. This exercise is carried out (if at all) perfunctorily in anganwadis in most states in India. In any case, no systematic analysis of this data, for policy planning and implementation purposes, is undertaken by any official of the departments or directorates/commissionerates tasked with improving the status of child nutrition in India. What is needed is a rigorous exercise to weigh all children in the state every month. If this is not done monthly for logistic reasons (although required as per the existing job chart of the anganwadi worker), weights of all U5 children should be scrupulously recorded at least once in two months. The Jatak software, already developed for use in some areas of Maharashtra, Kerala and West Bengal, would enable porting child weight data online through use of interactive voice response systems and obtaining immediate anganwadi-wise data on the number of severely underweight (SUW) U5 children.

Step number two would involve the lists of these SUW children (anganwadi-wise) being made available online (through a web-based health module linked to the Jatak SUW child data) to the Primary Health Centres (PHC) in whose area the anganwadi falls. The Auxiliary Nurse Midwives (ANMs) and Accredited Social Health Activists (ASHAs) working in a PHC area would then record the height/length and weight of each U5 SUW child in the health sub-centre area, with this data being subsequently ported into the health module. The software would automatically provide to the PHC, anganwadi-wise, the list of U5 children falling in the severe acute malnutrition (SAM) category.

Once the U5 SAM children are identified, they need to be medically examined to assess whether their condition requires them to be admitted to Nutrition Rehabilitation Centres, also termed as Child Treatment Centres (CTCs) and located in Primary Health Centres. Children suffering from environmentally induced diseases (tuberculosis, pneumonia, etc.) or congenital conditions (sickle cell anemia, heart disease, etc.) would be admitted to CTCs. Apart from children requiring treatment at specialist medical facilities, others would stay in the CTCs for a period of up to thirty days. The treatment protocol prescribed by the WHO would be followed to improve the health and nutrition status of these SAM children. It would also be desirable to provide health, hygiene and nutrition education to the caregivers (mostly mothers) who stay with the children in the CTCs, so that there is no relapse in the nutrition status of the children after their return home. Maharashtra had started the salutary practice of providing an allowance to the caregiver staying with the child in the CTC to compensate for loss in wages; this was an added incentive to ensure that children were admitted to and underwent the full course of treatment in the CTCs.  Monitoring of the health and nutrition status of these children by health workers needs to be done regularly for one year after their discharge from the CTC to ensure there is no relapse.

Children in the SAM category not requiring medical attention can, along with children in the moderate acute malnutrition (MAM) category, attend the Village Child Development Centres (VCDCs) at the local anganwadis to receive supplementary nutrition at two hour intervals in accordance with a laid-down nutrition protocol. As the pioneer in developing the VCDC concept, which has been internationally acclaimed, it is unfortunate that the Government of Maharashtra has not financially supported this initiative for the past three years.

Zeroing in on the geographical areas with the worst incidence of severe wasting (SAM) in U5 children would definitely reduce child mortality, given that SAM children have a mortality rate over nine times as high as children in the normal category. It would also check the impairment of cognitive and physical capabilities of U5 children, enabling them to lead fuller, more productive lives as adults. The tragedy lies in the failure of governments in India to systematically adopt the approach outlined above. My experience as Director General of Maharashtra’s Rajmata Jijau Health and Nutrition Mission is that, when U5 child mortality occurs, no attempt is made to trace the case history of such children: specifically, their nutrition and health status in the months before their death and whether any efforts were made to improve this status. A systematic use of real-time U5 children nutrition data to enable focused health and nutrition interventions followed by rigorous monitoring of treated children on an ongoing basis would help reduce mortality rates. Even using the current ICDS projectwise monthly progress reports (MPRs) on U5 children nutrition status (in terms of child weights) would give some idea of the areas in a state most prone to child malnutrition. If we examine the latest available ICDS MPR for Maharashtra for March 2016 (available at www.icds.gov.in), we observe that the ICDS projects with the highest percentages of severely underweight children are largely located in the tribal pockets in the districts of Palghar, Nandurbar, Amravati, Nasik and Gadchiroli, the very areas which have been at the centre of child death controversies for over two decades. If all the ten states of India with a percentage of SUW children over 10 percent of the U5 child population, as revealed by the 2013-14 Rapid Survey on Children (RSOC) data released by the Ministry of Women and Child Development, Government of India, were to rigorously monitor the monthly weights of children, they can put in place strategies to tackle SAM and reduce mortality in U5 children in the high burden areas.

India has the rather dubious distinction of being ranked 120 out of 130 countries in the prevalence of wasting in U5 children (Global Nutrition Report 2016). The 2015-16 National Family Health Survey (NFHS-4) shows that large states like Maharashtra and Madhya Pradesh have as many as 14 (out of 35) and 23 (out of 50) districts respectively with a severe wasting (SAM) rate of over 10 percent of the U5 child population, while U5 child mortality rates are as high as 58 and 65 (per 1000 live births) respectively for Bihar and Madhya Pradesh. So what holds our governance systems back from taking positive, proactive steps? Firstly, a complete absence of focus on what is the extent of the problem, where the problem exists and what policy measures are needed. Secondly, a failure to enforce accountability (in the ICDS and public health bureaucracies) for high rates of child malnutrition and mortality. And, finally, indifference to the debilitating consequences of child malnutrition, which society and the polity contribute to through inaction on a variety of fronts and a lack of compassion.