Podcasts about finance commission

Bharat Karnad is Emeritus Professor for National Security Studies, Centre for Policy Research, New Delhi and Distinguished Fellow at the United Service Institution of India. His most recent book, Staggering Forward: Narendra Modi and India's Global Ambition was published by Penguin in September 2018. Previous books include Why India is Not a Great Power (Yet) (Oxford University Press, October 2015), Strategic Sellout: India-US Nuclear Deal (2009), India's Nuclear Policy (Praeger, 2008), Nuclear Weapons and Indian Security: The Realist Foundations of Strategy, now in its second edition (Macmillan, 2005, 2002), and Future Imperilled: India's Security in the 1990s and Beyond (Viking-Penguin, 1994).He was Member of the (First) National Security Advisory Board, Member of the Nuclear Doctrine-drafting Group, National Security Council, Government of India, and, formerly, Advisor on Defence Expenditure to the Finance Commission, India.Educated at the University of California (B.A., Santa Barbara; M.A., Los Angeles), he has been a Visiting Scholar at Princeton University, University of Pennsylvania, and the University of Illinois, Urbana-Champagne, and Foreign Fellow at the Shanghai Institutes of International Studies and the Henry L. Stimson Centre, Washington, DC. He lectures at the top military training and discussion forums, including CORE (Combined Operational Review and Evaluation), DRDO Annual Directors' Conference, National Defence College, Higher Command Courses at the Army War College, College of Air Warfare, College of Naval Warfare, College of Defence Management, College of Military Engineering, and at Army Command and Corps level fora and equivalent in the other two Armed Services, and Defence Services Staff College, and also at the Indian Administrative Service Academy, Foreign Service Institute, and the National Police Academy.He was commissioned by the Headquarters, Integrated Defence Staff, Ministry of Defence, to conceptualize, conduct for several years, and lecture at the annual Strategic Nuclear Orientation Course for Brigadier-rank officers and equivalent from the three Armed Services, and conceived and conducted the first ever high-level inter-agency war game on the nuclear tripwire in the subcontinent (at the Army War College, 2003).

To get your dose of daily business news, tune into Mint Top of the Morning on Mint Podcasts available on all audio streaming platforms. https://open.spotify.com/show/7x8Nv1RlOKyMV5IftIJwP1?si=bf5ecbaedd8f4ddc This is Nelson John, and I'll bring you the top business and tech stories, let's get started.  State Revenue Deficit Grants Shrink India's states are receiving far less in revenue deficit grants from the Centre—plummeting from ₹1.18 lakh crore in 2021-22 to ₹24,483 crore in 2024-25, with further cuts expected next year. The 15th Finance Commission aims to push states toward financial self-reliance. While overall central transfers to states have crossed ₹9.89 lakh crore in FY25, direct revenue support has dwindled. Strong state tax revenue growth (11.1% in H1 FY25) is helping, but fiscal deficits remain near the 3% threshold. The big question: Can states sustain financial discipline without heavy central backing? Samsung Hit with $601M Tax Demand Samsung Electronics faces a $601 million tax demand from Indian authorities over alleged tariff evasion on telecom equipment imports. Officials claim Samsung misclassified “Remote Radio Heads” (RRH) to avoid 10-20% duties. The Directorate of Revenue Intelligence (DRI) launched a probe in 2021, revealing Samsung imported $784 million worth of RRHs duty-free between 2018 and 2021. Samsung denies wrongdoing and is exploring legal options. This case is part of India's broader scrutiny of foreign firms' import practices—Volkswagen is also under investigation for a hefty back-tax demand. Gold Rally Keeps SGB Investors from Cashing Out Gold prices are soaring, but investors in Sovereign Gold Bonds (SGBs) aren't redeeming. Despite 14.7 tonnes being eligible for early exit, only 0.5 tonnes have been encashed, as many expect prices to touch ₹1 lakh per 10 gm amid geopolitical tensions. SGBs, introduced in 2015, offer an 8-year tenure with early exit after five years. Those who invested in 2017-18 at ₹2,951 per gm are now sitting on a 14.7% annualized return, outpacing Nifty's 13.4%. Some experts advise locking in gains and shifting to fixed deposits yielding 7-8%. Meanwhile, gold ETFs are gaining traction, with assets nearly doubling in a year. Wipro GE Healthcare Bets Big on Local Manufacturing Wipro GE Healthcare has launched a $1 billion investment plan to boost local manufacturing, aiming to produce 70% of its products in India by 2030, up from 40-45% today. The company exports medical devices to 70 countries, with the US and Europe as key markets. While US reciprocal tariffs on Indian medtech are a concern, Wipro GE remains confident, citing its diversified supply chain. The investment will expand R&D, manufacturing capacity, and add a new facility to its four existing plants in Karnataka. With India's medtech sector projected to grow 20-23% annually, Wipro GE is positioning itself for a surge in demand. Indian Defence Stocks Poised for a Rebound? Indian defence stocks have slumped in the recent market sell-off, but analysts see a turnaround as US-India defence ties deepen. During Trump's first term, India gained license-free access to critical US military tech. While a second Trump presidency may initially prioritize US defence exports over Indian collaboration, long-term prospects remain strong. The US-India joint statement in February outlined plans for a 10-year defence partnership, co-production agreements, and an industry alliance for autonomous systems. Meanwhile, India's own defence push is accelerating, with ₹54,000 crore in fresh military acquisitions and a ₹50,000 crore annual defence export target by 2029. However, analysts caution that some stocks remain overvalued, and investors should adopt a selective approach.

To get your dose of daily business news, tune into Mint Top of the Morning on Mint Podcasts available on all audio streaming platforms. https://open.spotify.com/show/7x8Nv1RlOKyMV5IftIJwP1?si=bf5ecbaedd8f4ddc This is Nelson John, and I'll bring you the top business and tech stories, let's get started.  State Revenue Deficit Grants Shrink India's states are receiving far less in revenue deficit grants from the Centre—plummeting from ₹1.18 lakh crore in 2021-22 to ₹24,483 crore in 2024-25, with further cuts expected next year. The 15th Finance Commission aims to push states toward financial self-reliance. While overall central transfers to states have crossed ₹9.89 lakh crore in FY25, direct revenue support has dwindled. Strong state tax revenue growth (11.1% in H1 FY25) is helping, but fiscal deficits remain near the 3% threshold. The big question: Can states sustain financial discipline without heavy central backing? Samsung Hit with $601M Tax Demand Samsung Electronics faces a $601 million tax demand from Indian authorities over alleged tariff evasion on telecom equipment imports. Officials claim Samsung misclassified “Remote Radio Heads” (RRH) to avoid 10-20% duties. The Directorate of Revenue Intelligence (DRI) launched a probe in 2021, revealing Samsung imported $784 million worth of RRHs duty-free between 2018 and 2021. Samsung denies wrongdoing and is exploring legal options. This case is part of India's broader scrutiny of foreign firms' import practices—Volkswagen is also under investigation for a hefty back-tax demand. Gold Rally Keeps SGB Investors from Cashing Out Gold prices are soaring, but investors in Sovereign Gold Bonds (SGBs) aren't redeeming. Despite 14.7 tonnes being eligible for early exit, only 0.5 tonnes have been encashed, as many expect prices to touch ₹1 lakh per 10 gm amid geopolitical tensions. SGBs, introduced in 2015, offer an 8-year tenure with early exit after five years. Those who invested in 2017-18 at ₹2,951 per gm are now sitting on a 14.7% annualized return, outpacing Nifty's 13.4%. Some experts advise locking in gains and shifting to fixed deposits yielding 7-8%. Meanwhile, gold ETFs are gaining traction, with assets nearly doubling in a year. Wipro GE Healthcare Bets Big on Local Manufacturing Wipro GE Healthcare has launched a $1 billion investment plan to boost local manufacturing, aiming to produce 70% of its products in India by 2030, up from 40-45% today. The company exports medical devices to 70 countries, with the US and Europe as key markets. While US reciprocal tariffs on Indian medtech are a concern, Wipro GE remains confident, citing its diversified supply chain. The investment will expand R&D, manufacturing capacity, and add a new facility to its four existing plants in Karnataka. With India's medtech sector projected to grow 20-23% annually, Wipro GE is positioning itself for a surge in demand. Indian Defence Stocks Poised for a Rebound? Indian defence stocks have slumped in the recent market sell-off, but analysts see a turnaround as US-India defence ties deepen. During Trump's first term, India gained license-free access to critical US military tech. While a second Trump presidency may initially prioritize US defence exports over Indian collaboration, long-term prospects remain strong. The US-India joint statement in February outlined plans for a 10-year defence partnership, co-production agreements, and an industry alliance for autonomous systems. Meanwhile, India's own defence push is accelerating, with ₹54,000 crore in fresh military acquisitions and a ₹50,000 crore annual defence export target by 2029. However, analysts caution that some stocks remain overvalued, and investors should adopt a selective approach.

Welcome to Top of the Morning by Mint, your weekday newscast that brings you five major stories from the world of business. It's Monday, February 3, 2025. This is Nelson John, let's get started. US President Donald Trump has implemented tariffs on imports from Canada, Mexico, and China, citing a national emergency related to drug trafficking. Starting February 4, imports from Canada and Mexico will face a 25% tariff, except for Canadian oil which will see a 10% duty. Chinese imports will incur an additional 10% tariff. These tariffs are expected to increase prices in the US, potentially driving up inflation and slowing economic growth globally. In response, Canada has already slapped a 25% tariff on US imports worth Canadian $155 billion. Mexico and China have also promised retaliatory measures. The move has sparked concerns of a potential trade war, with Trump suggesting he might extend tariffs to other countries, including India. This could fundamentally alter global trade dynamics. Read N Madhavan's primer on Trump's latest decision to impose the tariffs and how it could affect India.  Naveen Jindal, chairman of Jindal Steel and Power Ltd, is expanding his steel empire globally, setting up a network of mines and steel plants across Europe, the Middle East, and Africa. He's a contender to acquire Italy's largest steel plant, Acciaierie d'Italia, potentially adding significant capacity to his operations. His privately-owned ventures, distinct from the publicly-listed JSPL, could match the scale of his Indian operations by 2028. Jindal's strategy includes developing end-to-end operations from mining in Mozambique and Cameroon to steel production in Oman and processing in the Czech Republic. This expansion has raised corporate governance concerns regarding potential conflicts of interest with JSPL. However, Jindal has taken steps to mitigate these concerns, such as resigning from an executive role and ensuring his private companies do not transact with JSPL, Nehal Chaliawala writes. Critics still question why these expansions are not under JSPL's umbrella, suggesting that it could protect the listed company from potential risks associated with international ventures.Foreign portfolio investors were notably absent from India's markets during the special budget session, setting the stage for what analysts anticipate could be a negative reaction in the markets. This comes amid concerns about a global trade war and ahead of a critical monetary policy announcement. Analysts Ram Sahgal spoke to, suggest that the government's focus on boosting consumption over capital expenditure and fears of an expanding global trade war might have spurred FPIs to adopt a cautious approach. FPIs have been net sellers in the Indian cash market since October, offloading shares worth ₹2.38 trillion through the end of January. They have also increased their bearish bets by shorting index futures and selling index call options—moves that reflect a heightened sense of caution and concern over India's corporate profitability and economic growth prospects amid global uncertainties. On the eve of the budget, FPIs significantly increased their short positions in Nifty and Bank Nifty call options, indicating a strong bearish stance. Recruiters are sceptical about the Union budget's plan to reduce migration by boosting job opportunities in rural areas and tier-II and -III cities. Devina Sengupta spoke to recruiters who argue that unless there's significant development in these areas, the pull towards India's 30 biggest cities will continue due to better employment opportunities and higher wages. Finance Minister Nirmala Sitharaman emphasized in her budget speech that the aim is to create enough jobs in rural areas to make migration unnecessary. However, recruiters like Aditya Narayan Mishra of CIEL HR Services point out that economic growth remains uneven across the country, with specific industries concentrated in certain states like Gujarat, Tamil Nadu, and Karnataka. This makes migration inevitable as job seekers move towards these hubs for better prospects. While the government plans to develop Global Capability Centres in smaller cities to ease the strain on major urban areas, recruiters call for more concrete plans on how these and other job creation initiatives will be implemented. Robust personal income tax revenue, showing strong buoyancy, facilitated substantial tax relief in the FY26 budget, Finance Secretary Tuhin Kanta Pandey highlighted. In a post-budget interview with Rhik Kundu and Gireesh Chandra Prasad, he explained that this would help counterbalance the effects of the recent tax cuts. The government is also pushing for mandatory deregulation reforms. These are required for states to access part of the Centre's 50-year interest-free loans for capital expenditure. Additionally, the 16th Finance Commission, led by Arvind Panagariya, is set to guide state governments on reducing their debt, aiming to lower the central government's debt-GDP ratio to 50% by 2031 from the current 57.1%.

In this conversation, journalist Puja Mehra speaks to Neelkanth Mishra, Chief Economist at Axis Bank. They explore the global economic ripple effects of Donald Trump's fiscal and trade policies and what they mean for India, inflationary pressures, shifts in global capital flows, the “China shock” impacting trade and manufacturing. They also discuss Elon Musk's geopolitical role, US-India trade dynamics, and how India can adapt. Tune in for insights into the challenges and opportunities for India in a rapidly changing global economic landscape. ABOUT NEELKANTH MISHRA Neelkanth Mishra is Chief Economist, Axis Bank. He is also the Head of Global Research and a Whole Time Director of Axis Capital. Prior to Axis bank, he was Co-Head of Asia Pacific Strategy and the India Strategist at Credit Suisse. He is a part-time member of the Indian Prime Minister's Economic Advisory Council as well as part-time Chairman of UIDAI (Aadhaar) and a part-time member of the Telecom Regulatory Authority of India (TRAI). He has also advised government bodies like the India Semiconductor Mission and the 15th & 16th Finance Commission. For more of our coverage check out ⁠⁠⁠thecore.in⁠⁠⁠ ⁠⁠⁠Subscribe to our Newsletter⁠⁠⁠ Follow us on:⁠⁠⁠Twitter⁠⁠⁠ | ⁠⁠⁠Instagram⁠⁠⁠ | ⁠⁠⁠Facebook⁠⁠⁠ | ⁠⁠⁠Linkedin⁠⁠⁠ | ⁠⁠⁠Youtube

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Impeachment proceedings are barreling ahead, with the vote to get the LFI-led resolution out of the National Assembly's political bureau winning. If the resolution gets to the Assembly floor, it'll be the first time in the history of the Vth Republic that impeachment is voted on against a president. Michel Barnier's government is starting to take shape - and he's got the same economic adviser as Gabriel Attal did. And Elisabeth Borne did. Plus, a former Prime Minister's name is circulating as the potential next Foreign Minister of France. And even more: the Prime Minister's office is still refusing to communicate budget planning documents to the opposition-led Finance Commission in the National Assembly. Tomorrow, their leaders promise to head to the Economy Ministry to get the documents. Show Notes - Paul de Villepin - Tweet (fr) - Nils Wilcke - Tweet (fr) - Marc Endeweld - Tweet (fr) - Arrêté du 16 septembre 2024 relatif à la composition du cabinet du Premier ministre - Legifrance (fr) - Destitution de Macron: la première étape de la procédure validée par le bureau de l'assemblée nationale - BFMTV (fr) More Context From Flap24 - Macron gets impeached Part I (en) - Give us a call, Michel Barnier (en) - ⁠Michel Barnier's Forming a Government⁠ (en) Send us questions and suggestions for our Friday interviews at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠flep24pod@gmail.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Cover our newspaper expenses. How about you buy us one today? ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://buymeacoffee.com/flep24⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Want your book, magazine, or website advertised at the beginning or end of the show? Get in touch! Fighting Fund: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://buymeacoffee.com/flep24⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Flep24's Twitter⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠@flep24pod⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Marlon's Twitter⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠@MarlonEttinger⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Olly's Twitter⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠@reality_manager

Thierry Solère, the man who organized dinners between the National Rally and Macron's camp, is back in the news. He reportedly, and not unpredictably, was the guy who negotiated RN's tacit agreement with Macron to put Michel Barnier in the driving seat as Prime Minister. And the Finance Commission president Éric Coquerel, and LFI deputy, still hasn't received key documents from the Economy and Finance Ministry about the 2025 budget. If he doesn't get them by the end of the day on Monday, he says he's going to have to head over to the Prime Minister's office to pry them out in person. Show Notes  - Thierry Solère, « point de contact » entre Macron et l'extrême droite - Mediapart (fr) - Budget : Éric Coquerel affirme qu'il ira «à Matignon chercher les lettres plafonds» si elles ne sont pas envoyées d'ici lundi soir - Le Figaro (fr) - Crimes sans châtiment: Affaire Bouaké, l'un des plus grands scandales de la Ve république (fr) Send us questions and suggestions for our Friday interviews at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠flep24pod@gmail.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.  Cover our newspaper expenses. How about you buy us one today? ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://buymeacoffee.com/flep24⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  Want your book, magazine, or website advertised at the beginning or end of the show? Get in touch!  Fighting Fund: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://buymeacoffee.com/flep24⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Flep24's Twitter⁠⁠⁠⁠⁠⁠⁠ ⁠@flep24pod⁠⁠⁠⁠⁠⁠⁠⁠ Marlon's Twitter⁠⁠⁠⁠⁠⁠⁠ ⁠@MarlonEttinger⁠⁠⁠⁠⁠⁠⁠⁠ Olly's Twitter⁠⁠⁠⁠⁠⁠⁠ ⁠@reality_manager

Apologies for the degraded audio - the regular audio processing made my voice sound too clipped, so I've opted for the unprocessed audio. I talked too quietly into the microphone today, sore throat. The finally, actually outgoing Economy Minister Bruno Le Maire was grilled today by the Finance Commission, who are taking the government to task for hiding just how big the deficit is. Le Marie and the Ministry are blaming the deficit on reduced revenues - cuts are on the horizon. Meanwhile, the man who'll be making the cuts, France's new Prime Minister Michel Barnier, is meeting with deputies from the presidential camp…and contemplating bringing back the Sarkozy-era Ministry of Immigration. Show Notes Déficit public : un an de mensonges de l'exécutif - Mediapart (fr) Michel Barnier aura mardi une première rencontre avec les députés du groupe macroniste EPR - Le Figaro w/ AFP (fr) Vers un retour d'un ministère de l'Immigration ? Barnier «veut traiter avec sérieux le sujet» - Le Figaro (fr) More Context From Flap24 Macron Hid The Deficit⁠⁠ (en) Send us questions and suggestions for our Friday interviews at ⁠⁠⁠⁠⁠⁠⁠⁠⁠flep24pod@gmail.com⁠⁠⁠⁠⁠⁠⁠⁠⁠. Cover our newspaper expenses. How about you buy us one today? ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://buymeacoffee.com/flep24⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Want your book, magazine, or website advertised at the beginning or end of the show? Get in touch! Fighting Fund: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://buymeacoffee.com/flep24⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Flep24's Twitter⁠⁠ ⁠@flep24pod⁠⁠⁠ Marlon's Twitter⁠⁠ ⁠@MarlonEttinger⁠⁠⁠ Olly's Twitter⁠⁠ ⁠@reality_manager⁠

हालिया बजट के बाद कई राज्य सरकारें आंध्र प्रदेश और बिहार राज्य को दिए जा रहे स्पेशल पैकेज के बारे में शिकायत करते हुए पाई गई। पर इससे बड़ा मुद्दा है केंद्र सरकार और राज्यों के बीच वित्तीय वितरण का। 62% राजस्व केंद्र सरकार द्वारा एकत्र किया जाता है जब कि राज्य सरकारें 62% खर्चे के लिए जिम्मेदार हैं। यह राजकोषीय असंतुलन राज्यों की अपनी जिम्मेदारियों को पूरा करने की क्षमता को सीमित करता है। आज की पुलियाबाज़ी पर इसे मुद्दे पर प्रणय अपने कुछ सुझाव साझा करते हैं। We often find state governments squibbling about revenue distribution amongst the Indian states, however the core of this issue lies in the vertical devolution of funds. A significant mismatch exists: while 62% of revenue is collected by the union government, the state governments are responsible for 62% of the expenditure. This fiscal imbalance limits the states' ability to meet its spending responsibilities. To address this, Pranay proposes an algorithmic approach to resolve this complex issue. Notes from Pranay:We discuss:* Vertical devolution is the key challenge* Share of Cess and surcharge is increasing* Ideas to reduce the fiscal imbalance* Central schemes* Non-tax revenue* What is the root cause of this imbalance?* HomeworkReadings:Let the Fiscal Federalism Games Begin by Pranay KotasthaneFifteenth Finance Commission Reports for 2021-2026Related Puliyabaazi:सोलहवे वित्त आयोग के लिए तीन सुझाव। 3 Ideas for the 16th Finance Commissionहमारी शहरी सरकारें इतनी कमजोर क्यों है? The state of India's Municipal FinancesIf you have any questions for the guest or feedback for us, please comment here or write to us at puliyabaazi@gmail.com. If you like our work, please subscribe and share this Puliyabaazi with your friends, family and colleagues.substack: Website: https://puliyabaazi.inHosts: @saurabhchandra @pranaykotas @thescribblebeeTwitter: @puliyabaazi Instagram: https://www.instagram.com/puliyabaazi/Subscribe & listen to the podcast on iTunes, Google Podcasts, Castbox, AudioBoom, YouTube, Spotify or any other podcast app. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.puliyabaazi.in

Bharat Karnad is Emeritus Professor for National Security Studies, Centre for Policy Research, New Delhi and Distinguished Fellow at the United Service Institution of India. His most recent book, Staggering Forward: Narendra Modi and India's Global Ambition was published by Penguin in September 2018. Previous books include Why India is Not a Great Power (Yet) (Oxford University Press, October 2015), Strategic Sellout: India-US Nuclear Deal (2009), India's Nuclear Policy (Praeger, 2008), Nuclear Weapons and Indian Security: The Realist Foundations of Strategy, now in its second edition (Macmillan, 2005, 2002), and Future Imperilled: India's Security in the 1990s and Beyond (Viking-Penguin, 1994). He was Member of the (First) National Security Advisory Board, Member of the Nuclear Doctrine-drafting Group, National Security Council, Government of India, and, formerly, Advisor on Defence Expenditure to the Finance Commission, India. Educated at the University of California (B.A., Santa Barbara; M.A., Los Angeles), he has been a Visiting Scholar at Princeton University, University of Pennsylvania, and the University of Illinois, Urbana-Champagne, and Foreign Fellow at the Shanghai Institutes of International Studies and the Henry L. Stimson Centre, Washington, DC. He lectures at the top military training and discussion forums, including CORE (Combined Operational Review and Evaluation), DRDO Annual Directors' Conference, National Defence College, Higher Command Courses at the Army War College, College of Air Warfare, College of Naval Warfare, College of Defence Management, College of Military Engineering, and at Army Command and Corps level fora and equivalent in the other two Armed Services, and Defence Services Staff College, and also at the Indian Administrative Service Academy, Foreign Service Institute, and the National Police Academy. He was commissioned by the Headquarters, Integrated Defence Staff, Ministry of Defence, to conceptualize, conduct for several years, and lecture at the annual Strategic Nuclear Orientation Course for Brigadier-rank officers and equivalent from the three Armed Services, and conceived and conducted the first ever high-level inter-agency war game on the nuclear tripwire in the subcontinent (at the Army War College, 2003).

As the dust settles on the proposals that the Finance Minister made in the Budget earlier this month, some aspects have become clearer while questions remain on others. We will dwell on topics such as: Why did the Minister choose to be less aggressive on the fiscal deficit front than she could have? Why were Andhra Pradesh and Bihar given special consideration when such action was within the purview of the Finance Commission? And what does the changeover from cooperative federalism to competitive federalism mean for the States? Guest: Lekha Chakraborty is a Professor at National Institute of Public Finance and Policy (NIPFP), and Governing Board Member of International Institute of Public Finance, Munich. Host: K. Bharat Kumar Edited by Jude Francis Weston

In the run-up to the Union Budget, Nitish Kumar and Chandrababu Naidu, the Chief Ministers of Bihar and Andhra Pradesh, respectively, who are in a position to decide the political fate of the National Democratic Alliance (NDA) government at the Centre, have demanded special financial packages for their respective States. These packages could potentially increase the fiscal burden on the Centre and also on other States. Should States get special packages outside Finance Commission allocations? Here we discuss the question  Guests: Arun Kumar, former professor of economics at Jawaharlal Nehru University, New Delhi; Pinaki Chakraborty, fellow at the National Institute of Public Finance and Policy Host: Prashanth Perumal You can now find The Hindu's podcasts on Spotify, Apple Podcasts and Stitcher. Search for Parley by The Hindu. Write to us with comments and feedback at socmed4@thehindu.co.in

Welcome back to THE IAS COMPANION. In today's lecture, we discuss the Finance Commission, a quasi-judicial body established under Article 280 of the Indian Constitution. It is tasked with equitable distribution of financial resources between the Centre and states. Constituted by the President every five years, the Commission comprises a Chairman and four members with specific qualifications in public affairs, finance, administration, and economics. #UPSC #IASprep #civilserviceexam #IASexamination #IASaspirants #UPSCjourney #IASexam #civilservice #IASgoals #UPSC2024 #IAS2024 #civilservant #IAScoaching #aUPSCmotivation #IASmotivation #UPSCpreparation #IASpreparation #UPSCguide #IASguide #UPSCtips #IAStips #UPSCbooks #IASbooks #UPSCexamstrategy #IASexamstrategy #UPSCmentorship #IASmentorship #UPSCcommunity #IAScommunity #UPSCpreparation #IASpreparation #UPSCguide #IASguide #UPSCtips #IAStips #UPSCbooks #IASbooks #UPSCexamstrategy #IASexamstrategy #UPSCmentorship #IASmentorship #UPSCcommunity #IAScommunity --- Send in a voice message: https://podcasters.spotify.com/pod/show/theiascompanion/message

Welcome back to THE IAS COMPANION Title: Navigating Centre-State Relations & Fiscal Federalism Overview: Explore the dynamic interplay between the Centre and states in India's federal system, focusing on legislative, administrative, and financial relations. Key Points: Introduction: Delve into the unique federal structure of India, balancing powers between the Centre and states while ensuring effective governance. Legislative Relations: Unravel the distribution of legislative powers, delineated by territorial extent, subject jurisdiction, and Centre's control over state legislation. Administrative Relations: Analyze the cooperative framework between the Centre and states, emphasizing shared obligations, mutual delegation of functions, and mechanisms for administrative flexibility. Financial Relations: Navigate the intricate landscape of fiscal federalism, encompassing tax allocation, revenue distribution, grants-in-aid, borrowing powers, and the role of statutory bodies like the GST Council and Finance Commission. Constitutional Provisions: Explore the constitutional safeguards and provisions governing Centre-state interactions, including coercive measures during non-compliance and interventions during emergencies. Case Studies & Examples: Illustrate theoretical concepts with practical examples from India's federal system, highlighting the complexities and nuances of inter-governmental relations. Critical Evaluation: Engage with scholarly discourse on Indian federalism, evaluating its efficacy, challenges, and potential areas for reform. Conclusion: Reflect on the evolving nature of Centre-state relations and fiscal federalism in India, emphasizing the importance of adaptability, cooperation, and balanced governance for national progress and unity. #UPSC #IASprep #civilserviceexam #IASexamination #IASaspirants #UPSCjourney #IASexam #civilservice #IASgoals #UPSC2024 #IAS2024 #civilservant #IAScoaching #aUPSCmotivation #IASmotivation #UPSCpreparation #IASpreparation #UPSCguide #IASguide #UPSCtips #IAStips #UPSCbooks #IASbooks #UPSCexamstrategy #IASexamstrategy #UPSCmentorship #IASmentorship #UPSCcommunity #IAScommunity #UPSCpreparation #IASpreparation #UPSCguide #IASguide #UPSCtips #IAStips #UPSCbooks #IASbooks #UPSCexamstrategy #IASexamstrategy #UPSCmentorship #IASmentorship #UPSCcommunity #IAScommunity --- Send in a voice message: https://podcasters.spotify.com/pod/show/theiascompanion/message

Rhythm & News podcast interview with Linda Taylor, Director of Housing for the Urban League of Metropolitan Seattle, sharing detials for the Washington State Housing Finance Commission's program to provide support and federal relief funds to qualified Washington homeowners behind on their mortgage due to hardships. Interview by Chris B. Bennett.

After the sun and champagne of Rio, the Noticias team return to the daily grind to update the latest news happening around Latin America on today's episode of iGaming Daily, sponsored by Optimove. In the latest episode, Fernando Noodt and Isadora Marcante provide updates in Chile regarding iGaming and sports betting regulations and Brazil's match fixing investigation in sports betting update.  Then, in the second half of the show, Payment Expert & Insider Sport's Editor, Ted Orme-Claye, dials in live from London to talk about his experience at Pay360 at the Excel Centre in London. Read more on today's talking points;Chile's latest developments at the Finance Commission: https://sbcnoticias.com/juego-online-chile-accj-comision-hacienda/CBF-SIGA join forces for integrity: https://sbcnoticias.com/br/cbf-siga-integridade-esportiva-acordo/Romário pushes for creation of sports betting CPI: https://sbcnoticias.com/br/cpi-apostas-esportivas-definicao-membros/Interview with BetGoals CEO Bogdan Andries: https://sbcnoticias.com/br/betgoals-ceo-bogdan-andries-entrevista/Remember to check out our partners Optimove at https://hubs.la/Q02gLC5L0 or go to optimove.com/sbc to get your first month free when buying the industry's leading customer-loyalty service.Host: Fernando NoodtGuest: Isadora Marcante, Ted Orme-ClayeProducer: Anaya McDonaldEditor: James Ross

The tussle between the Centre and some opposition-ruled states over devolution of taxes recently came to fore when chief ministers of Kerala and Karnataka openly alleged discrimination. Karnataka leaders even went a step ahead and staged a protest at Delhi's Jantar Mantar after giving full-page advertisements in national dailies alleging loss of 1.8 trillion rupees. Some are calling it the “south tax movement”. These states have alleged that the Centre's policies have shrunk their share of the divisible pool of taxes. So do states have a case against the Centre on fiscal transfers? And, what will this mean for the 16th Finance Commission?  Clearly, the Centre has to strike a delicate balance on tax devolution. Meanwhile, it is trying hard to do a balancing act on another front. Production Linked Scheme has been keeping it busy. So far, it has turned out to be a mixed bag. While it has given expected results in some sectors, in others it is yet to take off. A recent review of the three-year-old scheme threw a contrasting picture. So how can India rejig the PLI scheme?  A rejig in PLI would indeed help India realise its manufacturing dream. Moving on, market volatility with sharp swings between losses and gains has continued into the current month. While benchmark indices are flat so far in February, it has mostly been a one-way street for small-cap stocks that have taken it on their chin with sharp cuts. So will this downtrend continue going ahead?  Very soon, India's financial capital will be connected to Ahmedabad with bullet trains. Railway Minister Ashwini Vaishnaw took to platform X to share an animated video explaining the special features of the Mumbai-Ahmedabad train corridor. Find out more about the key features of this project in this episode of the podcast.

This is the Catch Up on 3 Things for the Indian Express and I'm Flora Swain.It's the 7th of February and here are the headlines.Prime Minister Narendra Modi while replying to the Motion of Thanks to the President's Address in Rajya Sabha today alleged that the opposition had not come with the intent of listening to the parliament and they could not suppress his voice. He accused the Congress of creating narratives to divide the country, and says the party is now trying to create a north-south divide.After Uttarakhand, another BJP-ruled state is now planning to introduce the Uniform Civil Code with Rajasthan's ministers indicating that the UCC Bill will be tabled in the next Assembly session after the Lok Sabha polls. Talking to journalists on Tuesday, School Education Minister Madan Dilawar said, quote, "If not today, then tomorrow, but we will bring it. When we will bring it, I cannot say. There should be a uniform law for everyone. Different laws for people damage the people and the unity is not visible. The entire country should be united." Unquote.An Indian-origin student who was pursuing a doctoral degree at Purdue University in Indiana, United States, has been found dead, reported local media on Wednesday. 23-year-old Sameer Kamath was found dead at a nature preserve on Monday evening. He is the fifth Indian-origin student to be killed in the US since January 2024. Last week, Neel Acharya, an Indian computer science and data science student at the same university, was found dead on the campus.Karnataka Chief Minister Siddaramaiah, Deputy Chief Minister DK Shivakumar and several other Congress ministers, MLAs and MPs from Karnataka protested at Jantar Mantar in New Delhi on Wednesday against the “injustice” done to the state in the devolution of taxes and grants-in-aid over the past few years. The protesters demanded that the Centre set right the losses to the tune of Rs 1.87 lakh crore allegedly incurred by Karnataka under the 15th Finance Commission. Siddaramaiah said the protest was not against the BJP but the discrimination against Karnataka.Hamas has proposed a ceasefire plan that would quiet the guns in Gaza for four-and-a-half months leading to an end to the war. As per reports, the Hamas counter proposal envisions three phases lasting 45 days each. The proposal would see militants exchange remaining Israeli hostages they captured on 7th of Oct for Palestinian prisoners. The reconstruction of Gaza would begin, Israeli forces would withdraw completely, and bodies and remains would be exchanged.This was the Catch-Up on the 3 Things by The Indian Express.

This week on the podcast, Martin has been doing some investigating – and millions of people are owed some serious cash in car finance repayments. He shares his step-by-step guide of how to find out if you're one of them. Martin has also been looking at whether you actually are being held in a queue when you call a customer service number. Plus, hear some of the money saving tips that listeners have picked up along the way, that might just help your wallet too. Martin Lewis is the founder of Money Saving Expert, but other sites exist.

This is the Catch Up on 3 Things for the Indian Express and I'm Flora Swain.It's the 5th of February and here are the headlines.Recording of statements to seizure of assets; summons to searches of premises; getting details from Income Tax and RBI – and detection of money laundering violations. These are the key aspects of the Enforcement Directorate's ongoing action in the Pandora Papers investigation that shows probes have been “initiated” for almost all Indian owners of offshore firms named in the 2021 investigation by The Indian Express. They include Anil Ambani to Sachin Tendulkar, Unitech promoters and Niira Radia; Gautam Singhania to Lalit Goyal and Malvinder Singh, according to the current status of the probes. The Pandora Papers refers to a trove of 11.9 million secret documents from 14 offshore service providers that give details of ownership of 29,000 offshore entities used by the super-rich to manage their global money flows.Union Finance Minister Nirmala Sitharaman, during the Question Hour in Lok Sabha today, rejected claims of ‘discrimination in allocating funds to non-BJP states' and said, quote, “There is no way political interests would come in the way of the states getting the funds. It's a charge that vested interests would like to go around. I don't have the discretion, it's the Finance Commission that takes the decision.” Unquote.Jharkhand Chief Minister Champai Soren won the trust vote in the state assembly today. While 47 MLAs voted in favour of the trust motion, 29 legislators opposed it in the 81-member assembly. Meanwhile, former Jharkhand CM Hemant Soren alleged that the Raj Bhawan was involved in his arrest carried out by the Enforcement Directorate (ED) in connection with a money laundering case.Ahead of Lok Sabha polls, the Election Commission today asked political parties not to use children in campaigning “in any form whatsoever”, including for distribution of posters and pamphlets or sloganeering. In an advisory sent to parties, the poll panel conveyed its “zero tolerance” towards use of children in any manner during the electoral process by parties and candidates. The poll watchdog said political leaders and candidates should not use children for campaign activities in any manner including holding a child in their arms, carrying a child in a vehicle or in rallies.Maldivian President Mohamed Muizzu today said the first group of Indian military personnel will be sent back from the island nation before 10th of March, while the remaining Indian troops manning two aviation platforms will be withdrawn by 10th of May. In his maiden address to Parliament, Muizzu said he believes a large majority of Maldivians support his administration with the expectation that they will remove foreign military presence from the country, and recover the lost oceanic territory.This was the Catch-Up on the 3 Things by The Indian Express.

With the formation of the 16th Finance Commission and the Union Budget round the corner, the finances of the North Eastern states become an important—and often overlooked—factor to examine. Economist Radhika Pandey and Deputy Editor TCA Sharad Raghavan examine the numbers in #Macrosutra Read Radhika Pandey's column here : https://theprint.in/macrosutra/high-debt-burdens-and-dependence-on-centre-the-unique-fiscal-constraints-of-northeastern-states/1929100/

The tenure of the 15th Finance Commission is nearing its end. And the government has kicked-off the process to form the 16th Finance Commission. The panel, which recommends distribution of tax revenues between the Centre and the states, and also between the states, is likely to be set up before December. So what are the burning issues that the 16th Finance Commission is likely to face?  Staying with the governance theme, a national daily recently reported that top multinational consultancy firms, primarily the ‘Big Four' and McKinsey & Co, won at least 308 consulting assignments from different government ministries, departments, and organisations between April 2017 and June 2022. In today's special segment, Ayush Mishra and Thareek Ahmed explore the role of Big 5 in India's Governance.  Financial markets, meanwhile, are entering Samvat 2080 on a solid domestic footing with India Inc. delivering robust earnings growth. All eyes, now, are on the Lok Sabha elections which are due in the middle of 2024. Globally, geopolitical tensions and volatility in bond yields continue to weigh on the market sentiment. We share with yoy a lowdown of the key events that will shape the markets in the new Samvat year. After the financial markets, let us move on to a case which made nationwide headlines in 2008 -- the Tata's Nano plant in West Bangal's Singur. Hit by protests, the conglomerate had to shift the project to Sanand in Gujarat. But it was in the news again recently after Tata Motors said it has won an arbitration award of ₹766 crore from the West Bengal Industrial Development Corp. Ltd. But what was this case all about? Listen to this episode of the podcast for answers. 

Bharat Karnad is Emeritus Professor for National Security Studies, Centre for Policy Research, New Delhi and Distinguished Fellow at the United Service Institution of India. His most recent book, Staggering Forward: Narendra Modi and India's Global Ambition was published by Penguin in September 2018. Previous books include Why India is Not a Great Power (Yet) (Oxford University Press, October 2015), Strategic Sellout: India-US Nuclear Deal (2009), India's Nuclear Policy (Praeger, 2008), Nuclear Weapons and Indian Security: The Realist Foundations of Strategy, now in its second edition (Macmillan, 2005, 2002), and Future Imperilled: India's Security in the 1990s and Beyond (Viking-Penguin, 1994). He was Member of the (First) National Security Advisory Board, Member of the Nuclear Doctrine-drafting Group, National Security Council, Government of India, and, formerly, Advisor on Defence Expenditure to the Finance Commission, India. Educated at the University of California (B.A., Santa Barbara; M.A., Los Angeles), he has been a Visiting Scholar at Princeton University, University of Pennsylvania, and the University of Illinois, Urbana-Champagne, and Foreign Fellow at the Shanghai Institutes of International Studies and the Henry L. Stimson Centre, Washington, DC. He lectures at the top military training and discussion forums, including CORE (Combined Operational Review and Evaluation), DRDO Annual Directors' Conference, National Defence College, Higher Command Courses at the Army War College, College of Air Warfare, College of Naval Warfare, College of Defence Management, College of Military Engineering, and at Army Command and Corps level fora and equivalent in the other two Armed Services, and Defence Services Staff College, and also at the Indian Administrative Service Academy, Foreign Service Institute, and the National Police Academy. He was commissioned by the Headquarters, Integrated Defence Staff, Ministry of Defence, to conceptualize, conduct for several years, and lecture at the annual Strategic Nuclear Orientation Course for Brigadier-rank officers and equivalent from the three Armed Services, and conceived and conducted the first ever high-level inter-agency war game on the nuclear tripwire in the subcontinent (at the Army War College, 2003).

The 16th Finance Commission is expected to be set up by November. So, this week on Puliyabaazi we discuss how vertical and horizontal devolution is decided based on the formula set by the Finance Commission, why some redistribution is inevitable, and Pranay's three ideas to incentivize better fiscal performance in the states. वित्त आयोग की फार्मूला के अनुसार केंद्र और राज्यों के बीच टैक्स का बंटवारा कैसे होता है? इस आवंटन में क्या बदलाव किये जा सकते है ताकि राज्यों के वित्तीय कामकाज में सुधार हो? इसी पर प्रणय देते है कुछ सुझाव इस पुलियाबाज़ी में। तो सुनियेगा ज़रूर। *****   useful links  ***** Let the Fiscal Federalism Games Begin by Pranay Kotasthane https://publicpolicy.substack.com/p/227-looking-ahead-looking-back#%C2%A7india-policy-watch-let-the-fiscal-federalism-games-begin Why the south-vs-north debate is a flawed way to analyse the 15th finance commission formula by Pranay Kotasthane https://theprint.in/opinion/why-the-south-vs-north-debate-is-a-flawed-way-to-analyse-the-15th-finance-commission-formula/44706/ India's Debt Dilemma by Barry Eichengreen, Poonam Gupta and Ayesha Ahmed https://www.ncaer.org/wp-content/uploads/2023/07/Paper-I-Barry-Poonam.pdf Fifteenth Finance Commission Reports for 2021-2026 https://fincomindia.nic.in/ShowContent.aspx?uid1=3&uid2=0&uid3=0&uid4=0 *****   more Puliyabaazi on Public Finance   ***** सरकार का पैसा आख़िर जाता कहाँ है? Understanding India's Public Finance ft. Avani Kapur https://puliyabaazi.in/episode/srkaar-kaa-paisaa-aakhhir-jaataa-khaa-hai-understanding-indias-public-finance-ft-avani-kapur हमारी शहरी सरकारें इतनी कमजोर क्यों है? The state of India's Municipal Finances https://puliyabaazi.in/episode/hmaarii-shhrii-srkaare-itnii-kmjor-kyo-hai-the-state-of-indias-municipal-finances ***************** Website: https://puliyabaazi.in Write to us at puliyabaazi@gmail.com Hosts: @‌saurabhchandra @‌pranaykotas @‌thescribblebee Puliyabaazi is on these platforms: Twitter: @‌puliyabaazi Instagram: https://www.instagram.com/puliyabaazi/ Subscribe & listen to the podcast on iTunes, Google Podcasts, Castbox, AudioBoom, YouTube, Spotify or any other podcast app.See omnystudio.com/listener for privacy information.

We breakdown the Finance Commission Hearing on the Spectra Contract termination- a new legislator steps out- Supreme Court decisions are bad news for Indigenous Sovereignty

HeartBeat this week features two conversations. Emily Northrup, Home Ownership Division of Washington State Housing Finance Commission joins for a brief update on the Grant program for homeowners across the state who are behind on mortgage payments. Following this update, we will be discussing the anticipated decision from the Supreme Court on Affirmative Action. With trends across the country pointing to this decision will be reversed, regular commentators Joy Stanford, Erin Jones, Stefani Coverson and Karen Fleshman will be discussing the impact this will have on communities.

India Policy Watch #1: Winning The Long GameInsights on current policy issues in India — RSJMany moons ago I sat down for lunch with someone who is often referred to in the media as a ‘doyen of the industry'. Among other things, I asked him the single most important advice he would give to anyone who is at the start of their career. I didn't have any burning desire to succeed in the corporate rat race. So, I wasn't looking for a life-changing insight. I asked it because custom demanded you ask such questions of doyens like him over a meal. Also, even back then I was aware that I should fill my pitaara with such stories because sometime in future I could use them to make myself appear interesting. Anyway, he squinted at me and with something that appeared close to conviction told me, “always defer gratification”. I nodded and pronged a moody forkful of Aglio e Olio. Instant gratification.Over the years I have come to appreciate that piece of advice. Running a successful business over the long term is all about how well you trade off short-term gains with doing what's right for long-term sustainability. The odds are stacked against you because most of your shareholders, the analysts and the media are measuring you on quarterly performance. You can put out a convincing long-term story that will deliver a big, deferred outcome but how can anyone be sure you're headed that way? Any short-term wobble can have people question you. It is tough to live a life of deferred gratification. I haven't followed it to any meaningful extent in my life. Nor do I think even the doyen has done so since that meeting. But having understood how difficult deferring gratification could be, I appreciate how important it is for long-term success in any field of human endeavour. And, of course, that includes public policy in case you are wondering why am I channelling my inner Deepak Chopra and inflicting random truisms on you. OPS versus NPSThis problem of grasping short-term gains while jeopardising the long-term has been running on my mind for the past few months as I see the spectre of the Old Pension Scheme (OPS) returning as a key election promise in the manifestos of Congress and AAP in state elections. There are two issues that I have been thinking about. First, what drives a political party to make a bonfire of the future for a questionable short-term electoral gain? And I'm picking on the OPS issue and these two parties only to illustrate this point. Every party in India has done this in the past. The abandoning of the farm laws was an instance of this. So, the question is what prompts a political party to do this and, importantly, why does the average voter get seduced by this? The other question is what can be done to change the incentives of the parties to do this? In other words, how can we make sure political parties learn to defer gratification? But before I get into them, let me give you a short overview of what's happening with the demand for OPS and the problem with states returning to it while abandoning the New pension Scheme (NPS). The Congress governments in Rajasthan and Chhattisgarh have already gone back to OPS and it has promised the same in its manifesto in Himachal and Gujarat. Not to be outdone, AAP plans to return to OPS in Punjab and might make it a plank in Gujarat. Nothing catches the imagination of our politicians like a bad economic idea, so we now have the Bharatiya Mazdoor Sangh, the RSS-affiliated trade union wing of the ruling BJP, demanding the same from the FM. As Business Standard reports:“National General Secretary of BMS, Ravindra Himte told IANS that during the meeting with Sitharaman, the organisation has urged the Finance Minister to restore the old pension system, increase the amount of minimum pension from Rs 1,000 to Rs 5,000 and to provide better health facilities to retired people under the Ayushman Bharat scheme.The BMS has also urged the Finance Minister to strengthen the social security scheme for workers and to take various other steps to protect the interests of the weaker section of the society.”For context, there are nine state elections scheduled for 2023. Pension of state government workers is a state subject. They can claim they have the mandate of the people to change this if they win using this as one of their key poll planks. Pension is a way to provide social security to workers following their retirement. A simple way to design a pension scheme is for an organisation to promise workers: upon retirement, we will continue paying, say 50 per cent, of your last drawn salary till you die. This is simple and intuitive. The worker has served the organisation for long and you reciprocate that loyalty by taking care of them after retirement. A few years of this scheme and you will soon have a reasonable request from the retired workers. The pension provided isn't keeping up with the inflation. The last drawn wage about a decade back is hardly worth anything now and a pension indexed to that is unfair to the worker. What do you do as a welfare-minded employer? You offer to index the wage to the revised pay scale that's prevalent now. So, the pension drawn by a worker is no longer 50 per cent of their wage when they were last working in the organisation. It is now 50 per cent of the wage of anyone doing the same job now to keep up with inflation. This is all good though a bit onerous. However, if you fast-forward this by a couple of decades, you will reach an uncomfortable scenario. The number of people who have retired from the organisation is now, say, equal to the number of people who are currently working. Those who have retired are drawing a pension that's 50 per cent of the existing pay scale. Simply put, if the total wages paid to working employees is Rs. 100, the pension paid to retired employees is Rs. 50. A third of the total wage bill is allocated to pension. Another decade and you might have two-thirds of the wage bill being taken up by pension. This is a problem in many ways. First, the working employee is continuing to take additional burden to pay for the ever-increasing number of retired employees. The incentive to be productive for the current employee keeps going down when they know the lion's share of any productivity gain will go to the retired pool. The organization continues to be weighed down by the pension bill. It finds it difficult to attract new talent because it cannot match market wage rates offered by newer companies that don't have such a pension bill. It also cannot invest in new products and innovations because the pension bill keeps rising. Unless the employer is the State, in which case, it can print money, increase its debt and keep paying for pension, there's really only one end state to this. The organization will go bankrupt because of its pension burden. This is not a hypothetical scenario. A whole generation of great American companies went down this path including the giant automakers of Detroit. The OPS that is being revived in many states in India is exactly this scheme. In 2004, the Union government introduced a New Pension Scheme (NPS) to avoid exactly this fate. The NPS model is quite simple. It is what is called a defined contribution model. The worker sets aside a small percentage of their salary every year towards a pension fund. The government matches that amount by making its own contribution from its coffers. This means there's an additional wage burden for the government during that year. This amount goes into a pension fund which is managed by professional fund houses regulated by the PFRDA. The fund houses have fairly rigid investment rules that prohibit them from investing in speculative assets. This ‘accumulation phase' continues till the employee retires. At the time of retirement, there's a nice little corpus that's built up. The employee can then take out, say 40 per cent of the corpus for their immediate need, the remaining amount moves into an annuity product where a fixed amount is paid out every year like a salary. Over the years the NPS scheme has been taken up by all Union government employees and gradually all state governments adopted it too. The professional fund houses that manage the NPS funds report annualised returns that have always been better than the Provident Fund (managed by the government) returns or even the best of mutual fund managers. And the first generation of retirees who use the NPS can vouch that the annuity they get has kept pace with inflation without having to wage-index their pension to the revised pay scale. This a beautiful solution that frees up the government from having a pension burden on its balance sheet after the retirement of the worker. No longer are current employees paying for the pension of the previous generation. In fact, we have often quoted the transition to NPS as one of the more successful public policy examples in India.Now, we want to undo it. There's really never been a clamour for OPS. But if you go around telling retired or near-to-retirement employees that we will give you a higher-paying pension scheme by taking you back to OPS, you might find some traction. Even if the numbers don't bear you out. Few voters will ask you how will you foot the bill. If the current and future employees don't see that eventually, they will be paying for this largesse, you might be able to convince every working employee that this will work better for them. I don't think we are there yet but I never bet against the popularity of a bad economic policy. They have tremendous seductive appeal. The Difficulty In Choosing Deferred GratificationThis is just another example where there are short-term pains in implementing a policy that will yield outsized long-term benefits. We could do that by implementing the NPS in 2004. Now, we are on the reverse. We want to implement a policy that might have short-term gains for a few but huge long-term costs for everyone. There are other similar policy questions in a democracy. How should we think about climate change? Should we take costly actions now by punishing polluting industries and impacting job creation while waiting for the benefits of these actions to pan out over decades? Or, how about increasing taxes today to rebuild roads and public infrastructure that will benefit society thirty years later? How should a political party think about these issues when their incentive is to win elections that happen every four or five years? Are democracies doomed to pick policies that are good in the short run but damaging in the long term because of this flaw?This intertemporal trade-off between maximizing societal welfare now and investing for the future is a vexing issue for political parties in a democracy. What I want to do is to understand the reasons for this trade-off being skewed in favour of short-term value maximisation and see if there's a way to engineer a choice architecture for the public that redresses it. I can think of four reasons why the skew exists.Firstly, there's the commitment problem among political parties. People are never convinced that a political party will stay the course on a particular policy. This is borne out of experience. Parties are less guided by economic ideology these days. The same set of politicians who might advocate a higher tax today and ask you to tighten your belts may change their tune tomorrow when they sense a change in the air. Also, politicians aren't permanent. There is turnover among them within a party itself. And the newer set might renege on previous commitments. So, for the citizens, paying short-term costs because you believe in the political commitment of a party now is fraught with risks.Secondly, forecasting is difficult. There's the fog of uncertainty and lack of adequate information to accurately predict these benefits. It is easier for a voter to use past performance as a guide to the future than predict it based on the impact of a new policy. The average voter anyway has only limited cognitive mind space for public policy. They might be able to think only about present outcomes with some clarity. This encourages politicians to think of policies that are typically myopic. Further, this information challenge means even if voters and the government say they care about the future, their actions will continue to be shortsighted. Separately, even those who are trained in public policy to think about the intertemporal trade-off can struggle to make accurate assumptions about the future. We live in a world that's more volatile and ambiguous than before. To predict the future and the societal context that will emerge then is a risky proposition. For the policymaker, it is optimal to maximise a more certain near-term than go out on a limb for the distant future. Thirdly, we have the old problem of concentrated benefits and diffused costs. It is natural for a smaller group for whom the benefits of a policy are concentrated to organise themselves and demand its implementation. The converse of this is also true. Any policy action where the short-term costs are to be borne by a small but organised group while the benefits will emerge over time for the wider society will get scuttled by this group. The repeal of the farm laws was an example of this. Even if the short-term pain and the long-term gains both accrue to this small group, they will oppose it. Because a better alternative for them is to redistribute the short-term pain to everyone while securing the long-term benefits for themselves. Or, to continue with the status quo.Finally, we have the problem of political parties that have either run out of ideas or who want to make a dent in new electoral terrain. To them getting a foothold through the aid of a myopic policy is worth the price. After all, they have many other policies that are better for society, which they might rationalise. Or, it is a question of survival and how does long-term matter if you will cease to exist then. This is what explains the actions of AAP and Congress on OPS. Is There A Way Out?So how does a policymaker counter these? I have a few suggestions, some of which might seem Machiavellian.First, there are ways to take the sting out of short-term costs. A deft policymaker can obfuscate some of the costs by making their calculations more complex (say, in the design of an auction or a tax) that is difficult for the voter to understand. The idea is to reduce the overt display of the cost to be paid in the short-term. The other option is to impose the short-term costs in a phased manner or in specific cohorts (‘grandfathering' certain beneficiaries for some time). There is a whole field of behavioural economics that can be used to nudge the voter towards a certain action like loss avoidance. The other way to do this is to diffuse the responsibility of who is imposing the short-term costs among many agents of the state including the government, independent regulators, corporates, local bodies or international treaties. This fragmentation of power and diffusion of the blame can make it easier to take difficult calls. They can take the sting out of the costs to be paid for future benefits. Second, there are ways in which the long-term gains can be crystallised into something more tangible in the present. There are ways in which some of the future payoffs can be advanced through well-choreographed pilots. This is particularly true for infrastructure investments where the example of a few recent successes can be talked up and few well-timed benefits early on in the investment process can convince the citizens of the long-term benefits. The other way to think about it is to play up the huge long-term consequences of not acting now with any small evidence in the present being used to project a terrible future. This is how climate change activists are playing the game today where any minor aberration in weather patterns anywhere in the world is used to proclaim ‘climate change is real'. You might disagree with them on principle but their approach to building public support is right. Third, we come to making political commitments sticky for the future so that voters are more willing to support taking short-term pain. The way to go about is to make any reversal of course difficult by making a policy difficult to dismantle. This can be achieved by placing exit barriers while implementing a policy that could include multiple players and steps whose consent would be needed to roll back a policy. They could have veto powers to stop such rollbacks. The more the institutional fragmentation, the higher the barrier to exit. Other means could be adopted too like making an amendment to the law or constitution or setting up a new independent authority to institutionalise a policy. By having such players whose incentives are aligned with long-term benefits promised in the policy, one can create a significant hurdle. The costs of reneging on a commitment go up significantly. Lastly, how do we counter the small but organised interests that might scuttle a policy because they don't want to take the short-term pain? In most cases, the problem here is how do we mobilise the larger group for whom the benefits are diffused and in the long-term to counter the smaller but highly motivated group? One of the ways to think about this is to choose a smaller subset from the larger group whose benefits (or costs in case the policy isn't chosen) might have greater salience for the group. For instance, talking about children and the future of our planet makes it easier to focus on the costs of not making climate change investments today. The ability to show with clarity that the redistribution of benefits of a policy that imposes costs on current beneficiaries and favours a future group is crucial in winning the battle of minds. The benefits are often spoken in abstract terms over a larger group than making it very specific for a focused smaller group. If that's done well, you get a countervailing force against the small, organised group that wants to retain the status quo.The intertemporal policy choice is crucial to ensure democracies don't lapse into the most shortsighted policy recommendations because that's what gets instant mass approval. The wise man who told me to ‘always defer gratification' gave me the best career advice. Unfortunately, he didn't tell me how to do it. I suspect he didn't know it too. Because it is tough.    For more on the Pension issue, check these editions:* Pension Tension in edition #174* Pension Troubles are Back in edition#162* A Framework a Week: Understanding Cognitive Maps in edition #62Thanks for reading Anticipating the Unintended! Subscribe for free to receive new posts and support our work.India Policy Watch #2: The Cats See Through the Monkey's TrickInsights on domestic policy issues— Pranay KotasthaneIn edition #131, I wrote that India's fiscal federalism resembles the monkey and the two cats fable. While states fight amongst each other to corner a higher share of the total money devolved to them, the Union government can go scot-free even as it appropriates nearly 60 per cent of the divisible pool resources, raises new cesses, and uses a part of these funds to run its own centrally sponsored schemes. This focus on horizontal devolution (the formula used for sharing resources between states) masks the far more serious problems of vertical devolution (how money is split between the Union government and all states as a whole).Given this starting point, one news item from the past week caught my attention. State Finance Ministers (FMs) in the pre-budget consultation meeting with the Union FM highlighted the problems with the vertical devolution regime. Their criticisms and suggestions can be summarised as follows:* Increase states' share in goods and services tax (GST) to 60 per cent from 50 per cent at present. * Merge cesses and surcharges with the existing taxes so that states are not deprived of their share, and* Rationalise the expenditure under centrally sponsored schemes. The Tamil Nadu FM said that "All states, irrespective of political parties, expressed a common theme -- states' fiscal autonomy is greatly constrained by the extent of centrally sponsored schemes, by the extent of changing ratios of funding of such schemes”.Let's focus on the first suggestion, which seems to be a reform pathway for India's fiscal federalism. What should we make of it? First up, a clarification. The 50 per cent share that the state FMs highlighted refers to the rate of taxation and not the share of total GST collections. If you check any bill, the GST is split equally into two halves — SGST (which remains with the states) and IGST (which goes into the total divisible pool to be split between Union and state governments). Since 42 per cent of IGST is again devolved to states using the Finance Commission formula for vertical devolution, states already get about 70 per cent of the total GST collections. If the proposed change were to be made, the states' share in GST will further rise to 76.8 per cent, according to former J&K Finance Minister Haseeb Drabu. Keeping this important clarification aside, the suggestion to increase the share of SGST by 10 per cent is excellent. As I have argued earlier, any fiscal reform that increases general purpose transfers to states increases their autonomy and allows them to decide their own priorities. In a country where the GSDP per capita of the richest state (Goa) is nearly ten times that of the poorest (Bihar), one-size-fits-all schemes run from Delhi can hardly be expected to be effective. However, the proposed reform in its current form will be dead on arrival. There's nothing in it that would motivate the Union government to change its stance, and nor are states promising anything at their end in return. With some conditionalities, this reform can be made to work in the overall interest of citizens.One, states should commit to sharing a fixed percentage of their increased SGST share with local governments. State governments cannot always play victims. They are simultaneously culpable in strangling the finances of local governments. An increase in the SGST share can act as a useful incentive mechanism to fix this crucial flaw in our fiscal federalism.Two, states should commit to a fixed increase in capital expenditure. The increased fiscal space can easily be frittered away by states. Three states switching back to the costly Old Pension System that burdens future generations is a case in point. Hence, an increase in the states' GST share should be made conditional on improving the quality of expenditure.Three, the increased SGST share should be accompanied by a sunsetting of centrally sponsored schemes. This will create fiscal space for the Union government to focus on higher-level functions: defence, trade, manufacturing competitiveness, higher education, and R&D. Admittedly, this change would be the toughest part of the bargain. The Union government runs so many centrally sponsored schemes precisely because it is politically beneficial for parties to portray that our day-to-day requirements are solved directly only by the largesse of the occupant of the 7, Lok Kalyan Marg. A move away from this low-level equilibrium would need immense political capital. To make this idea palatable, a move to the 60:40 sharing can be made optional. Only states that agree to the above three conditions can transition to the new regime. The rest can continue to be stuck with the older compromise. In sum, the proposed reform merits serious discussion. Advertisement: Here's an awesome opportunity for mid-career professionals who missed out on learning the liberal arts.Global Policy Watch: Myth-busting Reservations About Global Supply ChainsInsights on global issues relevant to India— Pranay KotasthaneGeopolitics is trumping geoeconomics the world over. The good old days when international trade was unapologetically perceived as a positive-sum game are past us. Countries are pursuing expensive industrial policies across sectors, by labelling everything from the display screen of your phone to the apps on it as “strategic”. In this worldview, one constant villain is Global Supply Chains (GSCs). The dominant narrative seems to be that shorter and more domestic GSCs are more reliable, and hence government intervention to snip these GSCs is desirable.But what does the evidence suggest? A few recent papers inject some sense into the ongoing debate. In this section, I will summarise key insights from them, and link out to more readings on GSCs.The one economist to read on GSCs is Richard Baldwin. His 2012 paper Global supply chains: why they emerged, why they matter, and where they are going covers the foundational concepts lucidly. It delivers one insight after another, busting many myths in the process. Sample this:“Globalisation is often viewed as driven by the gradual lowering of natural and man-made trade costs. This is a serious misunderstanding. Globalisation has been driven by advances in two very different types of ‘connective' technologies: transportation and transmission.” …In Balwin's view, the first unbundling of globalisation was made possible by steam and made profitable by scale economies and comparative-advantage-led separation. The second unbundling was made possible by information communication technologies and made profitable by wage differences. There's a lot more in the paper that I'm still processing. Do give it a read.Meanwhile, his latest paper with Rebecca Freeman investigates if the current structure of GSCs is too “risky”. They acknowledge that the recent challenges—COVID-19, climate change and geopolitical tussles—are of a global scale and will likely reshape GSCs. They add that all firms make a risk-reward trade-off. Recent events have already driven firms to invest more in building resilience. Thus, there are just two cases where a government intervention makes sense. First, when the social evaluation of this trade-off puts greater stress on the “risk” compared to the firm's evaluation of this trade-off, there's a case for market failure. The higher the gap between these two perceptions, the higher the likelihood of government intervention. From an Indian perspective, China's recent actions have widened this gap.Second, the complexity of GSCs might make firms (especially the smaller ones) underestimate the true risks involved. This lack of information can be another justification for government action in the form of mapping and making this information public. On the issue of which interventions might actually reshape GSCs, they suggest: Locational equilibriums are unlikely to shift unless firms perceive a permanent shock and governments commit to substantial, long-term production subsidies (as with agriculture), massive regulation (as in banking), or massive state-lead interventions (as in defense). Policies on essential medical supplies and semiconductors may well prove to be more durable and effective given their critical nature. Arguments that these sectors are part of today's national defense, broadly defined, are more credible, and thus more likely to endure long enough to reshape production structures. Going beyond government interventions, they identify a trend that's of importance to us in India. Given the improvements in industrial automation and AI, future manufacturing GVCs might become shorter. At the same time, future services GVCs might become longer and more widespread, given the multilateral agreements on services trade, which are far less protectionist than those in manufacturing trade. From an Indian perspective, these propositions mean that India (or any other country) is not likely to displace China in the manufacturing of goods which are not considered “strategic”. Instead, it is automation that's more likely to reduce other countries' dependence on China. On the other hand, India's opportunity lies in the services trade. Policies such as data localisation or restrictions on human capital movements will only dampen India's chances. Perhaps, the far more important lesson from the US export controls on China is not that the US might do something similar to India, but how difficult it is to displace a country of China's size once it's embedded itself in GVCs. India's strategy should therefore be to embed itself in services GVCs. HomeWorkReading and listening recommendations on public policy matters* [Podcast] DO NOT MISS this Puliyabaazi with Ajay Shah in Hindi/English on state capacity and public policy. While you are there, subscribe to our channel :). * [Report] The State of State Finances report by Saket Surya and Tushar Chakrabarty of PRS is useful reference material for anyone interested in contemporary Indian public policy.* [Twitter Thread] For a simple explanation of the central issue in India's fiscal federalism, read Pranay's thread. * [Explainer] This Trade Deficit-101 is worth your time. It asks: What is a trade deficit and how does it affect the economy? This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit publicpolicy.substack.com

Today's episode is a recording of a live debate between 37th LD Representative Position 2 candidates, Emijah Smith and Chipalo Street. The debate was hosted by the South Seattle Emerald on October 4, 2022 at the Rainier Arts Center. Hacks & Wonks' very own Crystal Fincher moderated the debate. Resources For links to the YouTube video, summary of lightning round answers and more, visit the debate's page on our website.   Campaign Website - Emijah Smith   Campaign Website - Chipalo Street   Register to vote, update your registration, see what's on your ballot and more - click here.   Past felony conviction? Information on re-registering to vote - Washington Voting Rights Restoration Coalition.     Transcript [00:00:00] Bryce Cannatelli: Hi everyone – this is Bryce Cannatelli from the Hacks & Wonks team. Today's episode of the show is a recording of a live debate between 37th LD State Representative candidates Emijah Smith and Chipalo Street. The debate was held on October 4, 2022 and was hosted by the South Seattle Emerald and was moderated by Hacks & Wonks' very own Crystal Fincher. We hope you find it informative and thank you for listening. [00:00:41] Crystal Fincher: Welcome! Welcome everyone to the South Seattle Emerald's 2022 General Election Candidate Debate. My name is Crystal Fincher. I'm a political consultant and the host of the Hacks & Wonks radio show and podcast, and I'm honored to welcome you all to tonight's debate. I'm also excited to hear from our guests running for State Representative Position 2 in the 37th Legislative District. Before we begin tonight, I'd like to do a Land Acknowledgement. I would like to acknowledge that we are on the traditional land of the first people of Seattle, the Coast-Salish Peoples, specifically the Duwamish peoples, past and present. I would like to honor with gratitude the land itself and the Duwamish tribe. We'd like to thank all of our partners here this evening, including the League of Women Voters of Seattle & King County for their support as well. Tonight's in-person show is following numerous COVID precautions. All in-person audience members, volunteers, staff, and candidates have either provided proof of vaccination or a negative COVID test upon entry, and all audience members in attendance are wearing masks. We're excited to be able to live stream this event on Facebook and YouTube. The debate also features questions from our audience members and voters like you. If you're watching the livestream online, you can submit audience questions by going to seattleemerald.com/debate. If you're in-person, you can write audience questions down on the note cards that have been handed out to you - or will soon be handed out to you - that will be picked up partway through the show. Volunteers will collect written questions at 8:00pm, right after the lightning round, and again at 8:30pm. Please keep questions to one question per card. A few reminders before we jump into the debate: I want to remind you all to vote. Ballots will be mailed to your mailbox starting Wednesday, October 19th, and you can vote anytime until election day on Tuesday, November 8th. You can register to vote, update your registration, and see what will be on your ballot at VoteWA.gov - that's VoteWA.gov. I also want to remind you that if you've had a previous felony conviction, your right to vote is now automatically restored after you serve your prison term, even while on community supervision. You do have to re-register to vote, but your right to vote exists. Go to freethevotewa.org for more details, and help spread the word. The candidates running for the 37th Legislative District State Representative Position 2 with us tonight are Emijah Smith and Chipalo Street - and we'll welcome them up to the stage right now as I explain the rules. So tonight's debate will begin with candidate introductions. Each candidate will have one minute to tell us about themselves. After introductions, we will enter a lightning round of yes/no questions, which candidates will answer silently by using paddles that indicate their answer. Just double-checking that you both have your paddles. Excellent, it's going to be a robust lightning round. Following the lightning round - at the end of the lightning round, each candidate will be allowed 90 seconds to explain anything you want to about what your answers were. Following the lightning round, we'll enter into the open answer portion of the debate. Each candidate will have 90 seconds to answer each question. Candidates may be engaged with rebuttal or follow up questions and will have 30 seconds to respond. Times will be indicated by a volunteer holding a sign in the front of the stage - right here. When a candidate has 30 seconds remaining, you will see the yellow "30-second" sign - right there. When a candidate has 10 seconds remaining, you'll see the orange "10-second" sign. And when time is up, the volunteer will hold up the red "STOP" sign, and I will silence the candidate. So now, we'll turn to the candidates who will each have one minute to introduce themselves, starting with Emijah Smith and then Chipalo Street. Emijah? [00:04:51] Emijah Smith: Welcome everyone. Thank you for being here. Thank you to all who are watching through the YouTube streaming. My name is Emijah Smith, please call me 'Mijah. I am raised and rooted in the 37th. I am a mother, I'm a grandmother, and a daughter of this district. Ever since I was a teen, I've been doing advocacy and community organizing - really seeing firsthand in real time that failed War on Drugs that is still continuing now, really seeing the devastation in my community. It was at that time that I said I want to bring healing, restoration, and resources back to the community. So my vision is healthy families and healthy communities, and in doing so, we have to look at multiple issues - prioritizing housing, fully funding education, pre-K, health equity, and really centering racial justice. I just want to highlight very briefly some sole endorsers within the 37th - Senator Saldaña, Girmay Zahilay - our King County Councilmember, Tammy Morales, Andrew Lewis, Kim-Khánh - thank you so much. [00:05:58] Crystal Fincher: Thank you so much. Chipalo Street. [00:06:01] Chipalo Street: Good evening. I'm an innovative problem solver, and I've been giving back to the South Seattle community for 15 years. We have some really pressing issues facing us, and we need to send a proven leader to Olympia to solve them. Housing prices are out of control, and it's displacing generational families and making renters pay more of their paycheck to skyrocketing rents. People are struggling to make ends meet, and the pandemic has only made this worse. The recovery, or so-called recovery from the pandemic, hasn't been felt evenly by all of us, and we need to protect working people so that we all come out of the pandemic better than we went into it. The pandemic's also made our schools worse and exacerbated existing issues. Just recently, Black and Brown kids tested three and a half levels behind their counterparts, and I want to make sure that all kids have a great public education system like the one that I went through. So I'm glad to be here tonight, and I'm honored to discuss how we move this district forward. [00:07:01] Crystal Fincher: Thank you so much. Also, it's a useful reminder that while you do have 90 seconds to answer, you aren't obligated to always take 90 seconds. Feel free to take it if you want to, but you will not be penalized for finishing early if you desire. So now, we will move on to the lightning round - making sure you both have your paddles in hand and ready. All right, we've got a number of questions to go through. So we will start talking about homelessness and housing. First question, are there any instances where you would support sweeps of homeless encampments? Yes or No? Looks like Emijah is waffling there, or landed on No. And we have Chipalo with No. Next question, will you vote to end single-family zoning to address housing affordability? Chipalo says Yes. Emijah says No. Would you vote to end the statewide ban on rent control and let localities decide whether they want to implement it? Emijah says Yes, as does Chipalo. Will you vote in favor of Seattle's social housing initiative, I-135? Both Emijah and Chipalo say Yes. Do you favor putting 400 additional units of housing and services for the unhoused in the CID? We've got a waffle with Emijah and a No with Chipalo. Do you rent your residence? [00:08:52] Chipalo Street: Sorry - as in, do I - am I a renter? [00:08:55] Crystal Fincher: Yes, are you renters? Both say No. Do you own your residence? Mortgage or outright. Chipalo and Emijah both say Yes. Are you a landlord? Emijah says No. Chipalo says Yes. In public safety, would you vote for a law ending long-term solitary confinement? Both say Yes. Would you vote for a law prohibiting traffic stops by armed law enforcement officers for low-level non-moving violations such as vehicle registrations and equipment failure? Both say Yes. Do you support establishing an independent prosecutor for cases of criminal conduct arising from police-involved deaths? Both say Yes. Do you support investments in the ShotSpotter police surveillance tool? Yep, it is in Mayor Harrell's budget that he just announced - so both say Yes. Do you think police should be in schools? Both say No. Would you vote to provide universal health care to every Washington resident? Both say Yes. The Legislature just passed a law that will cap insulin costs at $35 per month. Would you vote to expand price caps to other commonly used drugs? Both say Yes. Will you vote to ensure that trans and non-binary students are allowed to play on the sports teams that fit with their gender identities? Emijah waffled and Chipalo says Yes. [00:10:58] Emijah Smith: I waffle but I say Yes. [00:10:59] Crystal Fincher: Emijah waffles but she says Yes. For people wishing to change their name to match their gender, do you support removing the cost and need to see a judge for legal processing, name changes, and gender marker changes? Both say Yes. Will you vote in favor of an anti-extradition law that protects queer people, including children and their families, who flee to Washington from states where their gender-affirming care is punishable by law? Both candidates say Yes. Will you vote to increase funding for charter schools? Both Emijah and Chipalo say No. Will you vote for continued investments in anti-racism training for staff and students in Washington schools? Both candidates say Yes. Washington is facing a school staffing crisis and a funding crisis, especially with special education. Will you vote to increase funding in both of these areas? Both say Yes. Will you vote to enact a universal basic income in Washington? Both candidates say Yes. Our state has one of the most regressive tax codes in the country, meaning lower-income people pay a higher percentage of their income in taxes than the ultra-wealthy. In addition to the capital gains tax, will you vote for a wealth tax? Both candidates say Yes. Will you vote for any bill that increases highway expansion? Chipalo says Yes and Emijah is waffling. Would you vote to allocate state dollars to help accelerate the delivery of Sound Transit and other regional rail projects? Would you vote to allocate state dollars to help accelerate the delivery of Sound Transit and other regional rail projects? Both candidates say Yes. Will you vote to enact state investments and updating homes with more environmentally friendly utilities? Both say Yes. Have you taken transit in the past week? Chipalo says Yes. Emijah says no. Have you taken transit in the past month? Chipalo says Yes. Emijah says her family has, but not her personally, so that's a No. Elections. Potential changes in the way people vote for elections in the City of Seattle will be on the November ballot. Will you vote in favor of changing the system in Seattle elections? Both candidates say Yes. Will you vote in favor of ranked choice voting for Seattle elections? Both candidates say Yes. Will you vote in favor of approval voting for Seattle elections? You can only vote for one. So both candidates say No. Will you vote to move local elections from odd years to even years to significantly increase voter turnout? Chipalo and Emijah say Yes. In 2021, did you vote for Bruce Harrell? Emijah says Yes. Chipalo says No. In 2021, did you vote for Lorena González? Emijah says No. Chipalo says Yes. Did you vote in the general election in 2021? Emijah says Yes. Chipalo says Yes. In 2021, did you vote for Nicole Thomas-Kennedy for Seattle City Attorney? Emijah and Chipalo say Yes. Will you be voting for Julie Anderson for Secretary of State? Correct - she's running against Steve Hobbs. That is correct. Both candidates say No. Will you be voting for Steve Hobbs for Secretary of State? Both candidates say Yes. Will you be voting for Leesa Manion for King County Prosecutor? Both candidates say Yes. And that means that you will be voting No - you will not be voting Yes for Jim Ferrell. Correct - both candidates will not be voting for Jim Ferrell. Have you ever been a member of a union? Both candidates say Yes. Will you vote to increase funding and staffing for investigations into labor violations like wage theft and illegal union busting? Chipalo and Emijah both say Yes. Have you ever walked on a picket line? Both say Yes. Have you ever crossed a picket line? Both candidates say No. Is your campaign unionized? Both candidates say No. If your campaign staff wants to unionize, will you voluntarily recognize their effort? Both candidates say Yes. That concludes our lightning round. Thank you very much for that - helps to level set for the open-ended questions, but before we get to those, each candidate will have 90 seconds to explain anything you want about any of your answers. We will start with Chipalo. [00:16:40] Chipalo Street: Sure. I think the only one that I would like to explain is expansion of highways. The reason I answered Yes to that is the qualifier of is there any reason that I would do that. In general, no, I do not support the expansion of highways. However, if it is to help freight mobility that helps our unions, then that would be something that I would consider. If it comes back to our economy and helping union jobs, then we should definitely consider that. But in general, no, I would not vote to expand highways. [00:17:10] Crystal Fincher: And Emijah? [00:17:11] Emijah Smith: So I think there was a couple of questions there that I waffled on. And for me, when it comes - because I center racial justice - I'm an anti-racist organizer, I have to always look at what are the unintentional consequences of any decisions that's made. So there's this yes or no - we have to bring context into the conversation. So if it unintentionally or intentionally causes more inequities and more harm to people of color and those marginalized, I have to look more deeply into that before I could just say a quick, simple yes or no. So I just want to share why there might have been a waffle there. And also, if I don't fully understand something and I need to learn a little bit more and lean into community organizations and lean into the community - we talked about the ID - that's a very diverse community, they're not a monolith. So if there's an issue that's happening in the ID, I need to lean and learn from that community before I just make a decision as a legislator to do so. So I definitely - my style, my servant leadership is definitely to listen from community, learn from community, and be accountable to community. So I don't just do yes or no. Thank you. [00:18:13] Crystal Fincher: Thank you. So now we'll start the open answers portion. Our candidates will get 90 seconds to answer each question and they may be engaged with rebuttal or follow up questions and will have 30 seconds to respond. So starting out - in the Dobbs decision that obliterated the right to abortion - in Justice Thomas's concurring opinion, he identified decisions he felt should be re-evaluated after their ruling in Dobbs, cases that established our right to same-sex marriage, rights to contraception, and rights to sexual privacy. What can our State Legislature do to proactively protect these rights? Emijah? [00:18:55] Emijah Smith: Thank you for the question. And I definitely do not agree with the decision that was made. I think as state legislators and state leaders that we have to go directly and correct our Constitution to prevent these type of things from happening. Washington does a lot of talk. I think that our community, particularly in the 37th, is really intentional about our racial equity and about equity overall and fairness and all the great words. But we have to be actionable about that. And so putting something in the written language in our Constitution, we have to move in that direction. And I believe that our legislature for this 2023 session will be centering and very active around the Roe v. Wade and the Dobbs decision. [00:19:36] Crystal Fincher: Thank you. Chipalo? [00:19:38] Chipalo Street: Yeah, what I found interesting about Justice Thomas's dissent or concurrence was that he did not also include same or biracial marriage into his writing, even though that is based on the same logic of the other cases. Ironically, he is in a multiracial marriage. So the hypocrisy there, I don't think is lost on anyone. And I'm a product of a multiracial marriage - and so making sure that these rights are protected is deeply important to me. In terms of gay marriage, I am glad that we have a strong legislature and that passed marriage equality. In terms of Roe, I think we should fund clinics to take care of the increased traffic that we'll see in our state from the states that have - around us - that have banned abortion. I have background in technology. I would love to make sure that our data isn't used to go after people searching abortions or providing abortions. There's plenty of providers who provide telehealth. And if they are consulting with someone across state lines into a state that has banned abortion, I would be super scared about whether I could be sued, whether my data could be subpoenaed, if I could lose my license. And so making sure that we protect our data and protect our providers, I think, is paramount. Also making sure that we have security around our clinics - just as we'll have more traffic from people looking for abortions, we'll have more traffic from people protesting abortions. So those are some of the things that I would do to protect gay rights and the women's reproductive rights. [00:21:12] Crystal Fincher: And I just want to circle back to one thing for both of you in a 30-second rebuttal. Specifically when it comes to contraception, is there anything that strikes either of you - we'll start with Emijah - that you think the Legislature could do to help ensure and guarantee access and availability? [00:21:31] Emijah Smith: Well, definitely education. I definitely think that we need to ensure and continue to make sure that we're educating our youth in schools and making - contraception needs to be available. It needs to be available to all birthing parents, but we also need to make sure that we are including and not fighting to have education for our youth to understand sex education. And so that's been a big deal before the Roe V Wade issue had came up, so I'm a supporter of making sure our families are talking to each other, because this is a family issue. It's not just a woman's issue. It's not just anyone's issue. It's an issue about our bodies and our rights of what we want to do. [00:22:06] Crystal Fincher: Thank you. Thank you very much. And Chipalo? [00:22:08] Chipalo Street: Yeah, I agree. Education is a big part of this. Funding is also another part. Making sure that contraception is available to anyone who wants it. Making sure that preventative medications like PrEP is available to anyone who wants it as well - that goes a little bit past reproductive rights and into sexual rights for our folks, but making sure that it's just available to everyone, I think, is very important. [00:22:31] Crystal Fincher: Thank you very much. Next question. What will you do when you're - [00:22:35] Emijah Smith: We need some call and response in here - this is, you know - [00:22:40] Crystal Fincher: What'd you say? [00:22:40] Emijah Smith: I need some call and response. We in the 37th, we are very diverse - this is how we move, so I'm just - go ahead, sorry. [00:22:48] Crystal Fincher: What will you do in your capacity as a state legislator to help small local businesses? Chipalo? [00:22:55] Chipalo Street: So, I'm a small business owner myself and I understand the problems of balancing books, the stress that the pandemic has put on different small business owners. And so - number one, making sure that when we look around at other types of businesses - like we have incubators for tech businesses, we have incubators in high-tech businesses. Why don't we have incubators for smaller businesses, for communities of color? Access to capital is one of the issues that holds businesses back - where I think we saw in the video - the guy who founded WeWork completely did a scam and then got another $350 million to go start Lord knows what. So making sure that we have access to capital in community is really important. Working with organizations like Tabor 100, who provide incubation-type services is really important. And then working to make sure that our communities foster businesses - so for example, businesses that are in walkable and bikeable areas get more traffic. Not only will that increase business to those businesses, it will also get us towards a greener climate future if we have an environment and community that encourages us to get out of single-occupancy vehicles. [00:24:11] Crystal Fincher: Thank you. Emijah? [00:24:11] Emijah Smith: Thank you. I am a member of Tabor 100. And one thing I've learned - I've been a member for a number of years - is oftentimes the resources only go to a couple of places, right? So a lot of our small businesses are pop-ups. So a lot of, even through COVID, the money that's coming from the federal government or from our local government agencies are not making it to the small businesses. Similar to what Chipalo was saying, you need capital to even get a loan, but also the money that was coming to support the businesses, it wasn't reaching those businesses. It seems like the same million dollar companies, people who always were getting the money kept getting the money. And also, when I think about the displacement that's happening in our community, I would like to see some restrictions or some policy that is not targeting our small businesses in neighborhoods or communities that have been historically gentrified and displaced. Similarly like the Central District, but all throughout the 37th - all the constant building could be harming - it has harmed our communities, most marginalized, but it also, in some ways, makes it harder for them to start up and rebuild. So there's education and awareness. Sometimes small businesses do not find out about the funding until it's too late. And so I'm hearing from business owners all the time about they're seeing, they feel like it's a scam. They feel like even though they've had some opportunity to try to start something up in cOVID, that it's gonna go away. It's gonna be the same old, same old people getting it all the time, the same status quo. So we gotta figure something out. We have some small business owners here in the neighborhood. Even in my campaign, I learned, the small businesses cannot unionize because it costs so much money. We should be figuring out a way to make sure our small businesses can get themselves the access in the door. [00:25:49] Crystal Fincher: And that is time. [00:25:50] Emijah Smith: You said we can keep going. It wasn't a penalty, correct? [00:25:53] Crystal Fincher: No, the red is stop. [00:25:55] Emijah Smith: Okay. [00:25:56] Crystal Fincher: You get a 10-second sign. That 10-second sign is like, okay, we gotta wrap up. [00:26:00] Emijah Smith: Well, thank you very much. That's call and response. I just want to say that I definitely value our small businesses. I stay aware and I try to stay connected as much as possible. And I would do any and everything I could in my role as a legislator to make sure that those investments are being made in our small business community, particularly the 37th and people of color. Thank you. [00:26:18] Crystal Fincher: Okay. Chipalo. [00:26:21] Chipalo Street: Oh, sorry. Do we - I think we took a fair amount of time. [00:26:24] Crystal Fincher: Oh, yeah, we just did. Sorry. [00:26:25] Chipalo Street: I didn't necessarily have a rebuttal there. [00:26:26] Crystal Fincher: Okay. Next question. Washington State has seen an explosion of traffic violence in the last two years with an extraordinarily disparate impact on those who live in our districts - the 37th district. For example, there are major Sound Transit investments coming online in the district at Judkins Park that are surrounded by unsafe freeway entrances on Rainier Avenue. It's not if, but when that folks in the 37th will be injured or killed by cars at that station entrance. And I should clarify, this is an audience question submitted before. What will you do as a member of the legislature to ensure that our streets are safe for pedestrians and cyclists? Emijah? [00:27:07] Emijah Smith: I appreciate that question. Living here in the 37th, living here near MLK where the light rail has been placed on top, when the community organized to have that light rail put underground. And the community won that fight, but with promises of housing and business investments and all the things that did not happen from Sound Transit, we have it on top. And so there's been - I see, oftentimes, those accidents. I see those fatalities. My heart goes out to the family of the mother who was killed at the Mount Baker station. I knew her before she was a mother. So these things are near and dear to my heart. When I think about traffic safety, I think that we have the data - Sound Transit does. They have the data that we should be - as things are being built and created, they should be co-designed with community, and then we should be making decisions while we're implementing these light rail stations, these new highways, whatever, it's not a highway, but these new ramps. All that should be taken into consideration in the beginning because the lives that are being lost mainly are BIPOC lives, Black and Indigenous people. And so our lives are being sacrificed for something that we never even asked for here in South Seattle. But I also want to think about traffic safety. I think about when our young Black men, who are the most targeted to even get on Sound Transit, being harassed because they're looking for ID or for payment - that to me is a safety issue. That's why oftentimes you may see me driving or driving my children somewhere because it's a safety issue because they may be harassed by the police, as well as those who tend to cycle. [00:28:41] Crystal Fincher: That is time. [00:28:42] Emijah Smith: Thank you. [00:28:43] Crystal Fincher: I just want to double check just to be clear. So we got that yellow 30-second sign, the orange one - okay. [00:28:50] Emijah Smith: Thank you. [00:28:51] Crystal Fincher: Cool. Chipalo. [00:28:53] Chipalo Street: So bike and pedestrian safety is something that I lived on a daily basis. Before the pandemic, I tried to bike to work from the CD all the way to Microsoft two times a week. And that exposed me to some very nice bike trails, but also some very dangerous streets. And so if I'm elected into the legislature, I would want to make sure that we have a comprehensive network of connectivity. So regardless of what type of transportation network it is, it needs to be connected. We built a monorail from downtown to the stadium - like Climate Pledge - that doesn't do much. For a long time, our two streetcar networks weren't interconnected, which means people didn't want to use it. So we need to make sure that all of our infrastructure is connected. We need to invest in bike transit and infrastructure. And this is particularly important to the 37th, because we have two of the most dangerous streets in Rainier Ave and MLK Way, 40% of the injuries there are pedestrian. And I think this is a place where we can, I mentioned before, find a win-win with business, because businesses that are in bikeable and pedestrian-friendly areas get more business. So I believe this is a way that we can build a coalition around fixing the problem of safe streets in the 37th. And it's also an issue for our kids, because we have 10 or 11 schools that are on both of those two most dangerous streets. So we can make sure that our kids are safer today as well. [00:30:22] Crystal Fincher: Thank you very much. Next question. One of the biggest things we can do publicly to fight the spread of all airborne illnesses, including COVID and the cold and flu, as well as protect against poor air quality days because of wildfires - which we've seen over the past few weeks - is to improve ventilation and filtration in public buildings. What will you do to ensure that public buildings, including schools in the 37th district, meet recommended air circulation and filtration standards for good health? Chipalo? [00:30:57] Chipalo Street: To me, that sounds like a question - if I could be appointed to the Capital Budget, where we have the power to change our physical infrastructure. I would love to set aside money for that. When I look at committee assignments, we can start all the great programs that we want, but if we don't fund them correctly, they will not have the desired outcome. So making sure that whoever comes from this district gets put on Appropriations or gets put on Capital Budget is really important so that we can bring the money back to the district to make sure that it is used in community to make us better. [00:31:30] Crystal Fincher: Thank you. Emijah? [00:31:32] Emijah Smith: Thank you. In my experience being in Olympia, we can make the decision. So Senator Saldaña, of course, is leading the HEAL Act - that's an environmental justice issue, but it's about implementation. So it's easy - it's one thing to put in a law, then you do have to fund the law, but you also have to implement it. So when it comes down to the other municipalities locally, sometimes they're stuck. So we have to make sure we're following the legislation all the way down to the community or to the district that you want and make sure that it's being implemented in a way, in a timely fashion as well - not three years, four years, five years down the line, but immediately. That should be part of the planning. So of course we have to fund it, but if we're not able to implement it, it's just words. So I would like, in my leadership role, is to make sure that there's language in the bill that makes it more accessible to our municipalities so that they can actually do something about it. If you put in the bill and it can't be ambiguous, it needs to be really focused and maybe restricted funding to air quality in the schools, rather than just saying, Here's some money to your school for air quality. Because they'll use that money any way that they choose to use it if the legislature does not direct them with restricted funding. So I would target it. Thank you. [00:32:48] Chipalo Street: Can I provide an example of how we would do that? [00:32:51] Crystal Fincher: I will give you both 30 seconds to rebut. Go ahead, Chipalo. [00:32:53] Chipalo Street: So a good example of how we can do that and how that has been built into some of the laws that have been passed is - recently, we passed the cap and trade bill. And one of the things I liked about that bill is that it built equity into it, so 30% of the funds that are created from the cap and trade go back to investment in BIPOC communities and an additional 10% go into investment in our Native nations. So that is a source of revenue that we could use to improve air quality in our schools and I think aligns to the point of that funding. [00:33:26] Crystal Fincher: Thank you. Emijah? [00:33:28] Emijah Smith: Yeah, my follow-up with that would be - I just want to also say I'm solely endorsed by the Washington Conservation Voters. So they're looking at this issue across - and so I would definitely, again, lean into the organizations and to the leaders to help direct being a servant leader into doing this work. But nevertheless, what I have found in my experience - when there's a law passed - it takes the community to still apply the pressure on the entities and organizations to make something happen. So I have that experience, that organizing experience, and building those partnerships on the ground level to make sure it's being implemented. Because once they move it from the state, the state lets their hands go. So they need more guidance and direction, and that direction needs to come from community. Thank you. [00:34:09] Crystal Fincher: Thank you very much. Next question. How will people tangibly feel your impact as their legislator? What is one concrete thing that people will be able to see is different by the end of your term should you be elected? Emijah? [00:34:28] Emijah Smith: So are you asking what has been done already or what you plan to do going forward? [00:34:31] Crystal Fincher: No - if you are elected, what will people see is different by the end of your term than it is right now? [00:34:38] Emijah Smith: I think people will continue to see - at least for me - they'll see a continuation of the work. It's not something I'll start to do, it's something I will continue to do. So first and foremost, I think, doing racially justice-centered justice reform work - and that's all interconnected. So when I think about our healthcare and the doulas, the doulas have been seen as a medical profession led by Kirsten Harris-Talley, but we need to put money in the budget to make sure that they're being reimbursed for their services. I think in these two years - that you will see that that definitely happens. My granddaughter was born during COVID. My daughter almost lost her life during that birth. It is a well-known fact that Black women are three times as likely to lose their life during childbirth. So having a doula, having somebody there with culturally relevant care will make sure that the lives are not being lost. In addition to that, I am a board member of the Tubman Health Center - this is another place - making sure that we have capital investments to make sure that we create a clinic that is going to center Black and Indigenous community and bring culturally relevant care, and that will also serve our LGBTQ community. That's something that you will see, I believe, and I strongly believe within the next two years as a representative, if I am honored to earn your vote. Thank you. [00:36:00] Crystal Fincher: Thank you. Chipalo? [00:36:03] Chipalo Street: So technology has been changing our lives from the way we communicate, to the way we move about the city, to how we get health care, or even go about banking. And I'm excited to bring my expertise in the tech industry to make sure that technology opens doors for all of us, but also prevent technology from rolling back the rights that we have. So I mentioned earlier that one of the first things I would do is work to make sure that our data is protected so that it can't be used to go for people looking for abortions or providing abortions - that is something I would start with. And then continue to do the work that I have done in the tech space. When I got out to Seattle, I volunteer taught computer science at a school in South Seattle. We started with a Intro to Computer Science program and then over six years built it up to an Advanced Placement program. So I would make sure that we distribute the wealth of tech to make sure that everyone in this community can take part in the industry that's been changing our region. The 37th has also been a strong supporter of kinship care, and so I would build on the work that Eric Pettigrew has done to make sure that kinship care and kinship providers are funded at the same rate as a foster care parent. [00:37:12] Emijah Smith: May I follow up? [00:37:13] Crystal Fincher: You may. I'll give you both 30 seconds to follow up. [00:37:16] Emijah Smith: Thank you. I, first and foremost, want to say that I would love to learn the school that you served, 'cause I think that's a wonderful thing that you've done. But just being a resident in the 37th and living in South Seattle for a number of years, it's important for me to know what school you're mentioning. Also with regard to kinship care, I've held relationships throughout the years with our grandmothers for taking care of their kids every single day. And so there has been a gap of care and service for our kinship care program once Representative, our former representative, Eric Pettigrew had stepped back. [00:37:50] Crystal Fincher: And that is time. [00:37:50] Emijah Smith: So I've been in relationship with the community and I am definitely going to continue to serve that community. Thank you. [00:37:56] Crystal Fincher: Chipalo? [00:37:57] Chipalo Street: So the school is Technology Access Foundation - it was started by Trish. When I was working there, it started on Rainier Ave - right on Rainier and Genesee - and now they have bought a building down a little farther south in South Seattle. So it is a very well-known technology - [00:38:14] Emijah Smith: It's not a school. [00:38:14] Chipalo Street: Excuse me? [00:38:15] Emijah Smith: It's not a school. [00:38:16] Chipalo Street: Technology Access Foundation is a school. Technology Access Academy is the school. [00:38:21] Emijah Smith: Yeah, it's not in South Seattle. And actually they started right up here. [00:38:24] Chipalo Street: It started on Rainier Ave. [00:38:26] Emijah Smith: But - [00:38:26] Crystal Fincher: Let's allow Chipalo to complete his answer. [00:38:28] Emijah Smith: Okay. [00:38:29] Chipalo Street: So, okay - [00:38:29] Emijah Smith: I just wanted - [00:38:29] Chipalo Street: Technology Access Foundation is the foundation that started Technology Access foundation Academy, which is a school that started on Rainier Ave - which is in the 37th - and then was moved down farther south, which is still South Seattle, and serves people who have been displaced in the 37th. So it is still serving our community. I served there for six years, which is a long time, to go from a start of an Intro to Computer Science to an Advanced Placement Computer Science program. [00:38:58] Emijah Smith: I just want to - [00:38:58] Crystal Fincher: And we'll call that at time, and that is the rebuttal time that is there - [00:39:00] Emijah Smith: Okay, but they're not a school though and my daughter went to TAF Academy -. [00:39:03] Crystal Fincher: Emijah, please respect the time limits. [00:39:06] Emijah Smith: We're going to center time, or we're going to center the issues that are really in the 37th. I live in the 37th. I raised my daughter here next door. [00:39:13] Crystal Fincher: I have a question from a resident in the 37th that I'm going to ask. [00:39:16] Emijah Smith: Okay, I'll be respectful, but I also want us to bring - let's bring the real issues forward. [00:39:21] Crystal Fincher: So how would you help address the affordable housing crisis? Starting with Chipalo. [00:39:27] Chipalo Street: So when I think about housing, I think about three buckets of issues. This is something that we hear at every door when we go out and canvass. We were just talking to an elderly gentleman who is part of - he was a state employee, and so he has one of the oldest pensions, but we have not funded that pension so that he cannot keep up with the rising housing prices. So when I think of housing, I think of how do we stop harm, how do we get more units on the market, and how do we tide ourselves to the way there. So stopping harm looks like anti-displacement measures, so making sure that seniors can afford the rising taxes, making sure that - right now what we have is we allow seniors to defer taxes, but once they die, then they have to pay all of those back taxes, which essentially forces a family to sell the house, unless you have $10,000, $15,000, $20,000 lying around. We also need to increase renter protections - landlords can do some crazy things. Even though I'm a landlord myself, I live that business through progressive values, so we can't allow felons to be disqualified from having housing. I have a tenant who's a felon, he's one of my best tenants. We should lift the ban on rental control, we should - rent control statewide. We should limit the types of fees that a landlord can charge their tenants. In terms of long-term measures, we need to invest in low-income housing through the Housing Trust Fund. We need to figure out something about workforce housing because even two teachers who are underpaid already - if they're living together, they can't afford housing in the district - and we need to invest in mass transit to increase density around it to get us towards a greener climate future and have more houses. [00:41:04] Crystal Fincher: Thank you. Emijah? [00:41:05] Emijah Smith: Thank you. So what I've been doing and currently been doing is really - with community members, locked arms, going to Olympia, going to our state-level Washington Housing and Finance Commission - and demanding that they release the funds in our community. So what I have done with community, because it's a team effort, is to release the funds to make sure Africatown Plaza has been funded. Community development for us by us - the Elizabeth Thomas Homes of Rainier Beach, the Ethiopian Village here in South Seattle - these are all housing developments - low-income, stable housing opportunities in the 37th. That's one thing. The second thing is - I agree - lift the ban on rent control on the state level. Number two is definitely providing increasing - no, lowering the income level for seniors to qualify for these tax deferments. I've talked to multiple seniors who are living on Social Security and who cannot qualify for King County's tax exemptions or deferments, and so that's a hardship on our seniors. In addition to that, I do agree with middle housing, but what I want to see is that we're not continuing to displace community as we're bringing more density in. We need to be more equitable and look at the houses in the communities on the north side of the Montlake Bridge - let them carry some of the weight of some of the housing developments, because what we don't want to do is continue to keep displacing folks. But I've been doing the real work - I sit on coalitions that are looking to remove the barriers for felons or any person who's just trying to rent. But rent should not be our goal - home ownership is the goal in order to create generational wealth. Thank you. [00:42:41] Crystal Fincher: Thank you very much. Next question - from the audience. What is the State Legislature's role and responsibility on digital equity and addressing the digital divide? Emijah? [00:42:54] Emijah Smith: This is a multi-pronged question or answer and solution, because it's around making sure that our kids' education is fully funded. Because in order to close the digital divide, which I have done and supported as a co-convener of the Black Community Impact Alliance. We have just recently did our open house in the William Grose Center - that is a hub to make sure that we have a think tank and provide opportunities for our youth for the tech world. But that took community building, going to the City's office to get the land transferred - that took organizing. It also means you have to make sure that our children are prepared for kindergarten and making sure their reading and their math is on par at third grade. Making sure our freshmen are finishing their freshman year. So really being an advocate in Seattle Public Schools, making sure the strategic plan and the resources are going to those furthest from educational justice. That's what I do in real time. But the William Grose Center is what the community locked arms and myself as a leadership on co-convening the Black Community Impact Alliance - that's what we've done for the digital divide. And my children have benefited from the opportunities from coding, from change makers, from all the different things that our public schools do not offer. And our school system needs to be fully funded, particularly making sure those who are receiving special education services get a real opportunity - because you can't close the divide if you're dropping out of school or they're sending our kids to prison. You can't get the opportunity if you're not graduating. So that's my goal - is to make sure that we're fully funding our education and utilizing our education system and doing community building at the same time to make sure we're closing this. Thank you. [00:44:32] Crystal Fincher: Thank you very much. Chipalo? [00:44:35] Chipalo Street: Yeah, I agree. There's a ton that we can do for education. I'll speak specifically about what we can do to close the digital divide. It's crazy to think that more than 50% of our students aren't competent in math and sciences - that is just plain scary. And we have to change that. And that's in high school. And so we have to make sure that we improve our STEM education. We have to make sure that we do public-private partnerships to bring tech education into our junior highs and high schools. It's an embarrassment that we have so many resources here in this area, but yet our tech education lags behind many other places in the country and the world. When we also look at STEM and tech, we can't only afford to have people getting a good job out of tech. We need multiple ways for people to get good jobs. So to me, that looks like creating pipelines to the trades. For too long, we've sort of said, Oh, you went into the trades because you can't hack college. No, you went into the trades maybe because you like to work with your hands, or you want a job that can't get offshored, or you want dependable hours - two of my best friends went through four-year college, got jobs, hated them, came back, became journeymen electricians, get paid more than those jobs that they had going to college. One's about to start a business. And so making sure that the trades are a respected option for our kids is important, just like it should be an option to go into technology. And then we should also fund free two-year college. Free four-year college is great - we should definitely get there. However, we need to start with free two-year college, just like the Seattle Promise, because 50% of Seattle graduating seniors applied for that, and 1,000 took part in it. [00:46:09] Crystal Fincher: Thank you very much. [00:46:10] Emijah Smith: Can I follow-up? [00:46:11] Crystal Fincher: I'll give you 30 seconds each for a rebuttal - go ahead. [00:46:13] Emijah Smith: Thank you. I just wanted to also add - on the state level - that determines the college-bound scholarship money, right? And right now, it's saying you need to have at least a 2.7 GPA - it keeps going up every year. But also is saying that a young person cannot have a felony on their record. And so I really, truly want to get that removed, because how are we going to expect our youth to graduate and get to these opportunities, but we're already setting them back because they made a mistake? And we understand the brain science and the development there is that their brains are not fully matured. So we're kind of setting them up for failure, so that's another place I would like to work on. [00:46:49] Crystal Fincher: Thank you - Chipalo? [00:46:50] Chipalo Street: She's right. And it shouldn't only be our youth, it should be our brothers and sisters getting out of jail. We should not be limiting the professional licenses that people getting out of jail can attain. And then we should also make sure that University of Washington is funded with the Allen School. We have great resources there - or teachers and staff - but we don't have the resources to scale it out the way we would like to. [00:47:13] Crystal Fincher: Thank you. Another audience question. Crime has been increasing across the state, and people are concerned about their safety and whether the right things are being done to address current levels of property and violent crime. Given that the Legislature has already voted to increase public safety funding, largely devoted to policing and prisons, do you feel that we need to invest more in that area, or would you also take a different approach? And we are starting with Chipalo. [00:47:45] Chipalo Street: So I think we need to think about public safety comprehensively as more than just police. This is something that is near and dear to my heart. When I was at Brown, we had an open campus - me and my best friend were walking around campus onto a public street and Brown police came and asked me and my friend for our IDs. I didn't do anything wrong, so I continued to walk. My friend stopped, told him who I was, showed him his ID, but that didn't stop Brown police from calling out for backup. Providence police got that call, caught up with me and beat me so badly that they had to take me to the hospital before they took me to jail. Despite that experience, I still think police are part of public safety, but we have to be able to hold the police force accountable, or we're not going to have trust with the police force. I want to work with them to make sure that we set them up for success, so that we are sending a mental health counselor out to mental health crises - because they are trained to deal with these situations - and the person receiving a service will get a better service than sending three or four cops. We don't need cops in schools, we need counselors in schools. And so I think if we think more comprehensively about public safety, then we'll get better outcomes for the community and a better relationship with the police force. We should also fund like violence preventer programs. We should get guns off the streets - one of the sad things about gun violence prevention is that there are very, very common sense gun laws that 60, 70, 80 percent of people agree on. However, federal legislators can't get their act together, so we need to make sure that those laws pass here in our state. [00:49:14] Crystal Fincher: Thank you. Emijah? [00:49:16] Emijah Smith: Thank you. When I think about public safety, I think about community safety - it's not just a conversation just about what the police are doing in community. It's also about how does the community feel safe - with the police. So there has to be an accountability conversation. So on the King County Community Safety Violence Prevention Task Force that I've served on, really it came down - of all their research and all their conversations and co-design - it really came down to families needing their basic needs met. Housing, education, food security, the basic needs - they believe that that's what it's gonna take to really bring prevention. So our state has already been working at some things with regard to guns and taking, looking at how many bullets, a clip - I don't know, got so many words coming - reducing how many bullets that you can have. I think that we need to make sure that every person who gets a gun needs to have a class - similar, if you want to get your driver's license, you need to learn how to drive - we need to learn how to use a firearm. You also need to make sure that it is locked up. Again, I am solely endorsed by the Alliance for Gun Responsibility. So community safety, also - we need to look at the funding that's coming from the State Department - so there's federal money that was brought down to the state, they've started a new division. We need to work with that division to make sure that it's meaningful in the 37th, because the 37th has different issues. We're not looking at machine guns and going into the schools in that way. What we're looking at is handguns that we gotta get removed and get them off the street. Thank you. [00:50:53] Crystal Fincher: Thank you very much. Next question - from the audience. Washington State funds only about half of what Seattle Public Schools spends on special education and only about one-third of what Seattle Public Schools spends on multilingual education. What is your commitment to fully fund public schools, particularly special education and multilingual education, and how would you get that done? Starting with Emijah. [00:51:20] Emijah Smith: We gotta get out, we gotta go on the state level, we have to be loud and proud, and we have to make sure that the funding is fully funded. Of course, special education is not being resourced. Our special education students tend to be the main students that are getting pushed into the prison pipeline. So I am definitely gonna be loud and proud up there to make sure that that occurs, because we can't waver there. But Seattle Public Schools is also advocating to our state legislators right now, because the issue is that there was a tweak in the formula - that Seattle Public Schools is not getting as much money that it needs, but we also want to make sure our teachers are getting livable wages. And so it's coming to a point that if something's not addressed and more funding doesn't come into the education system, then maybe the public education here at Seattle Public Schools may falter. They're not sure what to do, teachers may go onto a strike. So we will have to figure it out, and we're gonna have to figure it out without taking away our children's basic needs - we should not be taking healthcare out of our schools, we should not be taking our social workers and mental health counselors away from our students. We have to do all the things, and we just have to figure it out and get creative. There are some great leaders there around education, but I'm a fierce advocate as well, and I don't think we should leave any student behind, especially those who are receiving special education services. Thank you. [00:52:34] Crystal Fincher: Thank you. Chipalo? [00:52:35] Chipalo Street: So currently there's a funding cap on how much Seattle Public Schools gets reimbursed for special education funding, and if we were to remove that, Seattle Public Schools would get another $100 million that it would be able to put towards that. That is just a start. We - McCleary got us closer to funding education, but we do not fully fund it, and this becomes a revenue issue. Washington State has the most regressive tax code in the whole country, despite how progressive and liberal that we claim we are. We need to make sure that every corporation and person pays their fair share - so that looks like closing corporate tax loopholes, making sure that we keep our capital gains tax, which is - the revenue from that is used to fund early education, which is a necessary part of the education system - and then also implementing a wealth tax. Personally, I would prefer an income tax because an income tax is - you can withhold that. It's been tried before, we know how to implement that - however, there are constitutional issues with that. So in lieu of an income tax, we should be able to try a billionaire tax. And the thing that gives me hope is while things get stymied on the federal level, we've seen localities and states try out new things, and so maybe this is something that we can pilot here in the state, and at the end of the day, a billionaire tax and an income tax aren't mutually exclusive. We can still work towards an income tax, even if we have a billionaire tax. [00:53:58] Emijah Smith: May I follow-up? [00:53:59] Crystal Fincher: Yep. You each can have 30 seconds. [00:54:02] Emijah Smith: Thank you. What I want to share is that our community - I agree - Washington has the worst tax setup and structure. And we have been, in Washington State, been trying to bring forth initiatives multiple times to the state to address this issue so that we can make our wealth more equitable. And our community members and residents and citizens have been voting it down. So I'm thinking with this inflation, with the impact of COVID - but now it could be a really great time that more of our citizens and our residents will see that this is really necessary and will vote in their best interest instead of voting it away. Thank you. As well as our legislators making a move in our best interest. [00:54:43] Crystal Fincher: Chipalo? [00:54:45] Chipalo Street: I'm good. [00:54:46] Crystal Fincher: Thank you very much. Next question. What is your connection to unincorporated Skyway? If elected, how will you support the development and investment in this neighborhood? Starting with Chipalo. [00:55:00] Chipalo Street: So if I was to be elected for this State Rep position, I would basically be one of three elected representatives for Skyway. So Skyway is unincorporated - that means it does not have a city council person to whom they can go for local issues. That basically means that myself, Representative Santos, Senator Saldaña and Councilman Zahilay would be the elected representatives for that area. So I would love to work with them in partnership to understand what development needs they would like to see. It was great to see that we went through a community budgeting process where folks were able to actually vote on how money was spent. And so supporting community involvement in how money is spent, making sure that we can advocate to get money set aside for Skyway because we know that it is not going to come through the City of Seattle, it's not going to come through the City of Renton. Those would be the ways that I would partner with the community to make sure that we develop it in a way that the community members see fit. [00:56:00] Crystal Fincher: Thank you. [00:56:01] Emijah Smith: Thank you. I love that question - yeah. So I'm connected with Skyway for the simple fact that I shop at Grocery Outlet, I get my taxes done over there, I patron the restaurants over there. My mom has recently moved, but had lived there for about 15 years - family's there, people use the post office there, banking there, utilizing the library there - Skyway is my community. And so that's my relationship. Second part to that question is - again, part of being Chief of Staff with King County Equity Now and just having relationships in that community - making sure that we got money from the state level to support Petah Village - early learning development, and also just the new outside - door - preschool, right? There's leadership there, there's expertise there, there's churches there, there's a nail shop - there's all the things that are near and dear to my heart, to be honest. That community is mine - not mine, but it's shared. I was on the Community Investment Budget Committee for King County's participatory budgeting to make sure that money was stored in a way that was definitely led by community members and getting the input from community members to see how they want to move that and looking to make sure that King County does it again in the future. So that was $10 million. We had a celebration about a few weeks ago, naming the projects that were funded. So yeah, this is near and dear to my heart - has been neglected, Skyway has been ignored. I'm thankful to King County Councilmember Girmay Zahilay, another sole endorser, for the leadership that he's had there, as well as Senator Saldaña, KHT - Kirsten Harris - I gotta stop, but all the legislators who have been pouring into that district. And let me shout out to Cynthia Green Home there - Center. [00:57:45] Crystal Fincher: Thank you very much. Another audience question. Will you use your position at elected office to uplift more progressive voices in the office? And that question goes to Emijah. [00:58:01] Emijah Smith: Will you repeat that please? [00:58:03] Crystal Fincher: Will you use your position in elected office to uplift more voices into office, and how will you do that? [00:58:09] Emijah Smith: Yes, most definitely. I see this opportunity as being a bridge builder, right? If I'm in Olympia, you'll have a space in Olympia. The work that I've done over the years has definitely been providing workshops, not only in my professional capacity but in my personal capacity, to make sure that our everyday people understand how a bill becomes a law, right? Also the nuances - how to effectively communicate with your legislators - how do I go into those spaces and really center racial justice, knowing that I am a descendant of stolen ones in this country? I can't go into those spaces and just talk A, B. I have to go in there and really give them the nuances, the impact of what it means to be a Black mother in this community and navigating these systems. So I share that expertise and I share that knowledge with others, as well as being a pTSA president - always constantly talking to families about how they can strengthen their partnerships with their teachers, strengthen their partnerships with their principals. That's just the natural work that I do. So in order to be successful in this role, I need the community to come along with me. I need y'all to be the wind behind my back and be in locked arms. That space is our space. That's my plan - if I'm there, they comin'. [00:59:18] Crystal Fincher: Thank you very much. [00:59:19] Emijah Smith: Thank you. [00:59:19] Crystal Fincher: Chipalo? [00:59:21] Chipalo Street: For sure. Building a pipeline of people to come after is something that I've always done in everything that I've done. So for example, when I got to Brown, I noticed that the pre-med students had a great support group to help other students of color get through pre-med, but we did not have that in the engineering. So I restarted our chapter of the National Society of Black Engineers so that we had a community to not only get us through, but also pull in the next class of freshmen and sophomores to get them through. I've continued to do that in Seattle. I serve on the board of a program called Institute for a Democratic Future where the goal is to increase the Democratic Party across the state. I loved that program when I went through it, but one of the reasons I joined the board was to make sure that we had more equity in the fellows and the board members. And in my six years, we have dramatically changed what the class makeup looks like, both racially but also geographically, so that we have a stronger Democratic Party across the state so that we can win in every district. And then on the board itself, we have drastically increased the number of people of color and women of color on the board. And we actually now have our first woman of color who is the Board Chair. So this is something that I've been doing in all aspects of my life - even at Microsoft, equity was a huge thing for me. I required that we interview a person of color or underrepresented minority for every opening on the team that I led, and we ended with a team of 40% people of color or underrepresented minorities. So yes, I would continue to do that in Olympia. [01:00:55] Crystal Fincher: Thank you. [01:00:55] Emijah Smith: Follow up, please. [01:00:57] Crystal Fincher: You can have 30 seconds - yes. [01:00:58] Emijah Smith: Yes - I also wanted to just include that - in my organizing and advocacy work, it's definitely bringing the youth along. My children have been in Olympia with me since they were in preschool - up there advocating for better school lunches - really understanding that process and understanding that they too, at one point, will be there in a leadership role. So I wanted to also include - it's not just - families include the children and includes the elders in that space. Thank you. [01:01:25] Crystal Fincher: Thank you. Next question. What is the most important climate legislation that should be passed by Washington in the legislature? And what climate organizations will you partner with to make that happen? Starting with Chipalo. [01:01:43] Chipalo Street: So I am glad that we have passed cap and trade. I think the next hurdle there is to implement cap and trade, especially the equity measures around the money that is brought in through the tax on carbon. So making sure that we implement that holistically - and groups that I'd work with are folks like Washington Conservation Voters, Sierra Club, the Environmental Climate Caucus - those are all groups that understand what's going on and can provide guidance and have been working to move this legislation through Olympia for multiple years. I'm also glad to see that the HEAL Act passed - and one of the things I loved about the HEAL Act is that it specifically called out that we need to gather data. As a scientist, I have a background in using data to address problems and for too long we've just sort of waved o

India Policy Watch #1: The Anatomy of DecentralisationInsights on topical policy issues in India— Pranay KotasthaneThe human-made floods in some parts of Bengaluru generated much furore. Writing about it in our previous edition, RSJ remarked:The way the political economy is structured right now, it is difficult to see how there will be enough devolution of power and finances to a city. A big city most often is a bankrupt political orphan in India. It doesn't look like changing any time soon.I share his anguish. However, I remain hopeful because there are many global examples of cities first committing themselves to and then rescuing themselves from the tyranny of half-hearted decentralisation. Decentralisation: Take 1The term decentralisation is a catch-all term in public policy. There was a time when it was touted as the solution to all ills. But many PhD dissertations, journal papers, and World Bank projects later, we understand it better now. Throwing some light on this concept can help us put a finger on what's exactly wrong with Indian cities. Let's begin by understanding the three forms of decentralisation — deconcentration, delegation, and devolution. Deconcentration is the simplest form of decentralisation. As the name suggests, it means decentralising functions and responsibilities. For example, if you can submit a passport application in Mysuru instead of having to come to the state capital, this function can be said to have been deconcentrated. The various government branch offices and grievance centre kiosks are examples of deconcentration. Delegation means that specific functions are carried out by another organisation or the government nearest to the citizen on behalf of the more distant government. In the Indian case, the plethora of state public sector enterprises (SPSEs) for public transport, power distribution, and water distribution are examples of delegation. For example, BESCOM is a Government of Karnataka company tasked with the responsibility of supplying electricity to the state capital.Devolution is the most comprehensive form of decentralisation. Devolved units hold defined spheres of autonomous action. Policy implementation and authority shift to the government nearer to the citizen. This typically means having elections at the subnational level. For example, Indian states are devolved units with clearly defined responsibilities, and tax revenue handles in the Constitution.With these definitions at hand, we have one way to diagnose the dismal performance of our city governments: the Union-State government relationship is characterised by devolution, while the State-local government relation is characterised by delegation and deconcentration. Elections do take place at local government levels. After the 74th Amendment in 1992, some more functions were devolved to urban local bodies. And yet, they hardly enjoy autonomy and authority in any defined sphere. State governments tightly control resources, personnel and plans, treating local governments as deconcentrated implementing agencies. Decentralisation: Take 2There's another way to see the Indian experience in light of decentralisation theories. Decentralisation can happen along three dimensions — political, administrative, and fiscal. These dimensions are further characterised by four factors: authority, autonomy, accountability, and capacity. The USAID Democratic Decentralisation Programming Handbook has a helpful framework that combines these three dimensions and four characteristics. In the chart below, here's how I think India's urban governments fare on the twelve parameters at their intersection. My crude classification into three categories is subjective and based on my understanding of local government public finances. Even so, this framework can offer valuable insights into India's urban governments. First, they are characterised by poor capacity across all three dimensions of decentralisation. Hardly surprising. But here's something more interesting: urban governments in India do pretty okay on administrative decentralisation, not so well along the political dimension, but score a big zero on the fiscal dimension. Devesh Kapur writes, “At the heart of state-building is a fiscal story”. And so, it's not unexpected that the sorry state of fiscal decentralisation is a powerful reason behind the abject failure of our urban governments. The Way AheadAnd so, to fix our cities, we need energy and focus on improving along the fiscal decentralisation dimension. And how exactly do we get there? In this talk below, organised by the Bengaluru Navanirmana Party, I propose a few ideas for the Bengaluru government:“Wherever possible, charge”: underpricing leads to overconsumption. Cities ought to get better at generating non-tax revenues.Strengthen the State Finance Commissions. It's amazing how bad they are, despite the example of the stellar performance of Union Finance Commissions. Untied grants through the state finance commissions are imperative for devolving critical political and administrative functions to urban local governments. Rent out property owned by city governments. Simplify laws for regulating businesses in the city so that trade license fees can go up. Capitalise on the property tax potential.India Policy Watch #2: This Moment is Precious Insights on topical policy issues in India — RSJThe more perceptive among you, dear readers, might have espied a certain pattern in my posts over the past six months. On the one hand, my tone has been steadily bullish on the medium-term prospects of the Indian economy. Almost four months back, in edition #168, I concluded that the then-nascent Ukraine war and the inflation roiling the developed world have put India in a sweet spot among global economies. I wrote:“I'm not often optimistic on these pages. But the way the stars have aligned themselves, India does have an opportunity to revive its economy in a manner that can sustain itself for long.”Then in edition #182 (Aisa Mauka Phir Kahan Milega?), I sort of doubled down on this:“For India, all of this is a golden opportunity. China will remain busy with these transitions that it has wrought upon itself. The jury is still out on whether it will have a soft landing on them. Global businesses that started seeking more resilient and cost-effective alternatives to China during COVID-19, are now convinced that they must employ a ‘China + 1' model to safeguard their long-term interests. There are only that many economies that have the labour pool, capital and a business environment that can take advantage of this shift away from China, however gradual.There is a high likelihood of a golden decade ahead for MSMEs in India if it plays its cards right.”In the past couple of weeks, there has been a flurry of reports from global research firms echoing the same sentiments. IMF, usually the last to know what's happening around the world, also seems to have cottoned on to this trend. This week its chief Kristalina Georgieva said that “despite global uncertainty and headwinds, India continues to be a bright spot in the global economy.” The proximate reasons are evident all around. Domestic demand is strong, inflation isn't the runaway kind, the bank balance sheets are stronger and cleaner than ever, and we seem to be seeing off the peak of the commodity cycle. The other large emerging markets have their own troubles. South America is in the throes of one of its ‘how to shoot yourselves in the foot' scenarios. Brazil is going through its most fractious election campaign ever, with the hard-left rhetoric of Lula seemingly ahead of Bolsonaro. That's been enough for Bolsonaro to again take a leaf out of Trump's playbook and raise doubts about the integrity of the electoral process. Venezuela has a Hugo Chavez bhakt running against a populist ‘outsider' who wants to upend the system and start fresh. Turkey has an autocrat who turns macroeconomic theory on its head in running its economy. South Africa is muddling through, and Russia is mostly an international pariah at the moment. Indonesia and smaller economies like Vietnam and Laos are possibly the only emerging markets that can claim to be in a similar zone as India. There's no competition, really.On the other hand, I have called out India's remarkable ability to lose its way because of either overconfidence or distracting itself with a ‘zero return' nationalist agenda of aatmanirbharta or some random ‘One Country - One X' ideology. Like I wrote in edition #182:“…not overdoing aatmanirbhar Bharat beyond the rhetoric and remaining an open and liberal democracy that convinces others that it will have sufficient checks and balances to not lose its way. These are the basic block and tackle moves to capitalise on the opportunity.Because the only lesson to learn from a possible China misstep is that overdetermined leadership and top-down economic thinking eventually fail.”It becomes challenging to plan for India's long-term prospects because of this dichotomy of being bullish on its economy while being worried about social harmony. I mean, one day, you applaud the entrepreneurial spirit taking root in small-town India and the other day, you hear another state enacting some love jihad law.It is like that E. B. White quote:“I arise in the morning torn between a desire to improve the world and a desire to savour the world. This makes it hard to plan the day.” Anyway, for the sceptics on either side, I will try to go beyond the evidence that people are good at avoiding. There are structural reasons why both these arguments about India hold.Let's tackle the issue of why India is in this sweet spot.Firstly, in the past few years, there's been a retreat from globalisation, or hyper globalisation , as Dani Rodrik would put it. This was somewhat inevitable if you go by Rodrik's trilemma: it is impossible to enjoy the fruits of integrating with a hyper-globalised economy, national sovereignty and being a democracy simultaneously, because only two of these things can be achieved at any one time. Rodrik believes that eventually, most large economies will choose national sovereignty and democracy and retreat from globalisation. This has come to a pass all over the world now. India, which has always been somewhat ambivalent about globalisation, now finds it doesn't stick out because of this stance. This retreat has meant that any economy with a large domestic market is at a relative advantage. Through a fortuitous mix of demographic dividend and periodic fiscal stimulation, domestic demand in India is going strong. This will attract capital flow into the economy.Secondly, the widespread adoption of digital means for production and distribution has meant the traditional constraints of infrastructure and labour laws aren't as binding as before. The national digital infrastructure in India (JAM, FASTag, UPI, etc.) is among the best in the world, and there's evidence now that they are improving domestic efficiencies across multiple sectors. Even surface transport, railways and ports have improved substantially in the last few years. These are nowhere near world-class, but the improvement is sufficient to reduce service costs across industries. Also, while ‘retail' corruption remains an issue in India, even the most prominent critic of the current government will admit that large-scale institutional corruption is a thing of the past. There are allegations of crony capitalism which might come back to bite in future, but for now, India provides as good a level playing field as any other emerging market.Thirdly, the aftermath of the pandemic has been surprisingly benign for India. The extended credit scheme for small businesses, free food distributed through PDS for BPL families and the restrain shown in keeping the fiscal deficit in check appear to have paid off. The national-level vaccination drive has all but erased the memory of those traumatic days of the second wave. Contrast that with China's botched vaccination policy that is still hurting its economy. I will confess I didn't see this scenario unfolding. Even the Ukraine war and the rise in oil price has been managed well. In continuing to buy oil from Russia (now in INR) and allying with the US on Quad, India seems to have manoeuvred the geopolitical storm well. Despite strong misgivings in some quarters (with good reasons), the key institutions (central bank, market regulators) have stayed objective and independent in their policy thinking. The bar on strong and independent institutions in emerging markets is set really low, and India seems to be scaling it easily. Finally, the freedom to raise or issue debt in its own currency, the inflating away of debt that's happening now and the flexibility of the labour market, all mean India isn't in any near-term danger of stagflation that's spooking the west.Many of the above factors can be credited to the sound policy measures taken over the past two decades. And, there's, of course, the good fortune of being in the right time at the right place.All good. So, why do I harp on the risks of social harmony and overdetermined leadership? Well, the history of many emerging countries is replete with such moments of opportunity in their history. Barring a few exceptions, most have failed to capitalise on them. They didn't get their economics wrong. Most often, they failed on political and social fronts.It turns out that being a functional, liberal democracy does improve your odds of getting this right. However, in most cases of failure, countries turned more illiberal, assuming it won't hurt them. Curbing freedom of expression, compromising judicial integrity, restricting voting rights of minorities and abusing coercive power of the State are classic moves here. This is abetted by creating an ‘us' versus ‘them' construct that takes over everything. The blame for any shortcoming can be laid at the doors of ‘them', who typically include the old elites, intellectuals and some hapless minorities. Once this template is set, the divisiveness in the society between ‘them' and ‘us' is played up at every opportunity. The pitch is queered further by the revisionist history project to redress past wrongs, the mindless glorification of the nation, a continuous search for enemies among the ‘them' and escalating levels of punishment for any deviation from the norm. The middle continues to shrink, and debates and compromises become rare. Everything is maximal. Many people think these moves won't hurt the economy because in markets, as the Indian aphorism goes, ‘paisa bolta hai (money talks)'. This is both a flawed understanding of economics and a complete disregard for history. A society that loses its middle ground makes terrible choices. And that shows up in the economy.We have a tremendous economic opportunity because of the way cards have fallen in our favour. And we are making the classic mistakes in potentially fomenting social trouble and losing the opportunity again. I don't understand why it is difficult to hold these two ideas together in our brains and find a way forward.There's a possibility that this dichotomy could be solved if there were public discussions on these issues together. But it is rare to find that kind of a platform where a dispassionate and constructive discussion about India's future is possible. Those who believe in the ‘sweet spot' thesis have very little inclination or a sense of historical perspective to appreciate the existential risks of social disharmony. They are happy nodding off to ‘this is India's time' lullaby. While the others who bemoan the loss of what's often called the idea of India cannot believe India could be, by design or happenstance, sitting on a golden opportunity under this regime. There must be a catch somewhere and they spend inordinate amount of time looking for it. It reflects the barren intellectual landscape prevalent in India that we cannot acknowledge and debate these in good faith. You can only be monotheistic. There can only be one truth. Those who reject it are enemies. It's a pity really. India Policy Watch #3: The Nature of Competitive Federalism in IndiaInsights on topical policy issues in India— Pranay KotasthaneIt's rare for semiconductors, federalism, and favouritism to appear in the same story. But the last week did blow up a political storm that combined the three. Vedanta-Foxconn signed a much-publicised Memorandum of Understanding (MoU) for a display and semiconductor fab with the Government of Gujarat. All was good. but then came the news that the consortium turned down the Maharashtra government's reportedly superior offer, leading to accusations of the Union government having a hand in favouring Gujarat. Keeping regional and partisan politics aside, how should we parse this news? Are there frameworks to help us appreciate such events?At first, it appears encouraging that states are vying to kick off advanced manufacturing. It seems to be a perfect illustration of the merits of what is known as Competitive Federalism. States compete for investments, woo investors, and the best one “wins” the prize. Didn't the Prime Minister say in his independence day speech that "it is the need of the hour that besides cooperative federalism, we need cooperative competitive federalism. We need competition in development”?To answer these questions, it is worthwhile to understand the “competitive federalism” rubric. This term gained prominence in public finance literature after a 1987 paper by Albert Breton titled Towards a Theory of Competitive Federalism. Crucially, he identified two preconditions for competitive federalism to be efficient. The first condition is competitive equality. This condition is similar to the logic behind affirmative action for individuals from disadvantaged communities. Healthy competition between states requires not just good umpiring but also progressive rule-making, one that does not put some states at a permanent disadvantage. In Breton's words:“horizontal competition does not require that all competing units be of equal size any more than efficient competition in markets requires that firms be of equal size. But it must be that the large units are not in a position to continually dominate, coerce, and in other ways prevent the smaller units from making independent autonomous decisions; nor are they in a position to inflict "disproportionate" damage on them. The smaller units must be able to compete with the strong on an equal footing.… A capacity to compete is more than a capacity to talk; it is also, and radically, a capacity to exert a real influence on decisions. That is the real meaning underlying the notion of "monitored" competition.”Breton identified that the responsibility for ensuring competitive equality lies squarely with the union government. In his view, two monitoring mechanisms available with the central governments are: intergovernmental grants that offset the disadvantages of certain states, and a “Council of States” that can genuinely give “salience to the provincial dimensions of public policies”.The second condition is cost-benefit appropriability. As Breton puts it:“In competing to attract businesses to its jurisdiction, either by supplying particularly attractive local public goods, such as theatre, concerts, or dance, by offering tax advantages, or by buying part of the output of the sought-after enterprises, the government of a province should not be able to shift the burden of the offered amenities to the citizens of other jurisdictions.”In other words, states should be regulated by a hard budget constraint, i.e. the consequences of breaching spending limits should be significant. A moral hazard develops if states assess that the central government will bail them out in case of fiscal failure. When the budget constraints on states are of a “soft” nature, they will continue to borrow or widen their deficits, confident that other state and union governments will come to the rescue. Competitive federalism under such conditions would not be efficient. A third precondition, proposed by M Govinda Rao, is that there should be no impediments to the unrestricted mobility of factors and products across the country.This discussion of competitive federalism suggests that not all competitive federalism is good. It needs guardrails to deliver results. And the Indian experience with competitive federalism has been suboptimal as governments have violated all three preconditions to varying degrees.As a result, we are stuck in a low-level equilibrium. States compete, but on issues such as wasteful subsidies on private goods, welfare schemes, and salary structures for government employees. And when they do compete to attract investments, they do so based on spectacular tax and non-tax waivers rather than on promises of better business and law and order environments.To make India's competitive federalism deliver, we need reforms along three dimensions:Reforms to ensure that states face a hard budget constraint. An independent fiscal council that ex-ante evaluates the costs of government proposals can help. Consider the fact that both Maharashtra and Gujarat allegedly promised subsidies worth Rs 40000 crores and Rs 28000 crores, respectively, without public scrutiny of the costs and benefits of the project. An independent fiscal council would come of use here by conducting an independent financial evaluation of such policies before they receive the final approval. A stricter Fiscal Responsibility and Budget Management Act can also help here.Reforms to improve competitive equality. Designing intergovernmental transfers that actually help bridge the gap between states will create a level playing field. Moreover, an institution that allows states and union governments to bargain and negotiate, like the one proposed by the 14th Finance Commission, might also contain unhealthy competition. And most importantly, a union government that acts as an unbiased umpire is crucial for competitive federalism to succeed. Without some reforms along these lines, we will continue to see competitive federalism of the more harmful kind. HomeWorkReading and listening recommendations on public policy matters[Article] Raghuram Rajan's note questioning the underlying assumptions of Production Linked Incentives. [Paper] Fiscal Decentralisation in Indian Federalism by M Govinda Rao explains India's experience with fiscal devolution. [Report] The USAID Democratic Decentralisation Programming Handbook is a fantastic starting point for understanding decentralisation. * From Alexis De Tocqueville's magisterial Democracy in America, in which he writes: “the federal system was created with the intention of combining the different advantages which result from the magnitude and the littleness of nations; and a glance at the United States of America discovers the advantages which they have derived from its adoption”. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit publicpolicy.substack.com

Happy Independence Day!- Pranay Kotasthane and RSJThis newsletter can often seem pessimistic about India. That isn’t true, though. Every year, on Independence Day, we remind ourselves and our readers why we write this newsletter. This is how we ended the Independence Day edition of 2020:“What we have achieved so far is precious. That’s worth reminding ourselves today. We will go back to writing future editions lamenting our state of affairs.We will do so because we know it’s worth it.”  This year we thought it would be fun (?) to run through every year since 1947 and ask ourselves what happened in the year that had long-term repercussions for our nation. This kind of thing runs a serious risk. It can get tedious and all too familiar. Most of us know the landmark events of recent history and what they meant for the nation. Maybe. Maybe not. We’ve given an honest try (of over 8000 words) to see if there’s a different way of looking at these familiar events and their impact on us. Here we go.1947 - 1960: Sense Of A Beginning 1947Perhaps the most significant “What, if?” question for independent India surfaced on 17th August 1947 when the Radcliffe Line was announced. The partition of the Indian subcontinent has cast a long shadow. What if it had never happened? What if Nehru-Jinnah-Gandhi were able to strike a modus vivendi within a one-federation framework? These questions surface every year around independence.The indelible human tragedy of the partition aside, would an Akhand Bharat have served its citizens better? We don’t think so. We agree with Ambedkar’s assessment of this question. In Pakistan or the Partition of India, he approaches the question with detachment and realism, concluding that the forces of “communal malaise” had progressed to such an extent that resisting a political division would have led to a civil war, making everyone worse off. The partition must have been handled better without the accompanying humanitarian disaster. But on the whole, the partition was inevitable by 1947.“That the Muslim case for Pakistan is founded on sentiment is far from being a matter of weakness; it is really its strong point. It does not need deep understanding of politics to know that the workability of a constitution is not a matter of theory. It is a matter of sentiment. A constitution, like clothes, must suit as well as please. If a constitution does not please, then however perfect it may be, it will not work. To have a constitution which runs counter to the strong sentiments of a determined section is to court disaster if not to invite rebellion.” [Read the entire book here]1948What if Mahatma Gandhi wasn’t killed that year? How would the course of our history change? Gandhi spoke like an idealist and worked like a realist. He was possibly the most aware of the gap between the lofty ideals of our constitution and the reality of the Indian minds then. He knew the adoption of the constitution was only half the work done. He’d likely have devoted the rest of his life to building a liberal India at the grassroots level. His death pushed a particular stream of right-wing Hindu consciousness underground. We still carry the burden of that unfinished work.1949The Constituent Assembly met for the first time in December 1946. By November 26th 1949, this assembly adopted a constitution for India. Even a half-constructed flyover in Koramangala has taken us five years. For more context, Pakistan’s Constituent Assembly began work on 10th August 1947, and their first constitution came into force in March 1956, only to be abrogated two years later. India’s founding fathers and mothers were acutely aware that they were elite, unelected, and unrepresentative of the median Indian. They dared to imagine a new nation-state while grappling with that period's harsh economic, social, and political realities. Their work should inspire us to strengthen, improve, and rebuild—but never to give up on—the Republic of India.For more, check out the miracle that is India’s Constitution in our Republic Day 2021 special edition.1950We have written about our Constitution a number of times. It is an inspiring and audacious document in its ambition to shape a modern nation. It has its flaws. Some consider it too liberal; others think it makes the State overbearing. Some find it too long; others feel it comes up short. This may all be true. However, there is no doubt our constitution has strengthened our democracy, protected the weak and continues to act as a tool for social change. It is our North Star. And a damn good one at that. 1951Few post-independence institutions have stood the test of time as the Finance Commission (FC), first established in 1951. In federal systems, horizontal and vertical imbalances in revenue generation and expenditure functions are commonplace. Closing the gap requires an impartial institution that is well-regarded by various levels of government and the people. The Finance Commission is that institution.It’s not as if it didn’t face any challenges. As a constitutional body established under article 280 of the Constitution, it was sidelined by an extra-constitutional and powerful Planning Commission until 2014. But we have had 15 FCs in total, and each key tax revenue-sharing recommendation has become government policy.1952Our Constitution adopted a universal adult franchise as the basis for elections. Every citizen was to be part of the democratic project. There was to be no bar on age, sex, caste or education. And this was to be done in one of the most unequal societies in the world. The ambition was breathtaking. To put this in context, women were allowed to vote in Switzerland only in 1971. Not only did we aim for this, but we also moved heaven and earth to achieve it in 1952. In his book India After Gandhi, Ram Guha describes the efforts of the government officials led by the first Election Commissioner, Sukumar Sen, to reach the last man or woman for their ballot. The elites may lament vote bank politics or cash for votes scams and question the wisdom of universal franchise. But we shouldn’t have had it any other way. And, for the record, our people have voted with remarkable sophistication in our short independent history. 1953 For a new nation-state, the Republic of India punched above its weight in bringing hostilities on the Korean peninsula to an end. Not only did the Indian government’s work shape the Armistice Agreement, but it also chaired a Neutral Nations Repatriation Commission (NNRC) that was set up to decide the future of nearly 20,000 prisoners of war from both sides. This experience during the Cold War strengthened India’s advocacy of the Non-Aligned Movement (NAM).  1954Article 25 guaranteed the freedom of conscience and the freedom to profess, practice, and propagate religion to all citizens. But how does one define a religious practice? And can a practice under the garb of religion breach the boundary of individual rights or public morality? This is a familiar conflict zone in secular States and would inevitably show up in India because everything in India can be construed as a religious practice. Like Ambedkar said during the constituent assembly debates:“The religious conceptions in this country are so vast that they cover every aspect of life from birth to death…there is nothing extraordinary in saying that we ought to strive hereafter to limit the definition of religion in such a manner that we shall not extend it beyond beliefs and such rituals as may be connected with ceremonials which are essentially religious..."In 1954, the Supreme Court gave a landmark judgment on what constitutes a religious practice in what’s known as the Shirur Math case. It held that the term religion would cover all practices integral to that religion. Further, the Court will determine what practice will be deemed essential with reference to doctrines within that religion itself.This test of ‘essentiality’ in religion has kept the public, the legislature and the courts busy since (entry of women in Sabarimala, headscarf in Islam, to name two). The outcome has bent towards individual liberty in most contexts, but the ambiguity in the definition of essential means it could go the other way too.1955Another wild "What, if” moment that we like to recall relates to Milton Friedman’s visit to the Indian finance ministry in 1955. What shape would India’s economy have taken had his seminal document “A Memorandum to the Government of India 1955” been heeded?In this note, Friedman gets to the root of India’s macroeconomic problems—an overburdened investment policy, restrictive policies towards the private sector, erratic monetary policy, and a counterproductive exchange control regime. Being bullish about India’s prospects was courageous when most observers wrote epitaphs about the grand Indian experiment. But Friedman was hopeful and critical both.The Indian government, for its part, was humble enough to seek the advice of foreigners from opposing schools of thought. At the same time, it was too enamoured by the Soviet command and control model. In fact, many items from Friedman’s note can be repurposed as economic reforms even today.Here’re our points from Friedman’s note.1956The idea of One Nation, One ‘X’ (language, election, song, tax, choose any other) is both powerful and seductive. It is not new, however. Back in the 50s, there was a view that we must not strengthen any identity that divides us. So when the question of reorganisation of the colonial provinces into new states came up, an argument was made that it must be done on factors other than language. Nehru, ever the modernist, thought the creation of language-based states would lead us down the path of ethnic strife. The example of nation-states in Europe built on language in the 19th century and the two devastating world wars thereafter were too recent then. So, he demurred.Agitation, hunger strikes and deaths followed before we chose language as the primary basis for reorganising the states. It was perhaps the best decision taken by us in the 50s. As the years since have shown, only a polity assured of its heritage and identity will voluntarily accept diversity. The melding of our diversity into a single identity cannot be a top-down imposition. We should never forget this.1957India’s economic strategy of state-led industrialisation through deficit financing in pursuit of import substitution took off with the Second Five-Year Plan. Heavy industries needed imported machinery, inflating India’s import bill. Since the exchange rate was pegged to the British pound, it meant that Indian exports became pricier. This imbalance between rising imports and flagging exports was financed by running down the foreign exchange reserves. By 1957, India witnessed its first foreign exchange crisis. This event had a significant effect on India’s economy. Instead of devaluing the rupee, the government opted for foreign exchange budgeting - every investment in a project needed government approval for the foreign exchange required to buy foreign inputs. The immediate crisis in 1957 led to controls that worsened India’s economic prospects over the next 35 years.1958The government nationalised all insurance companies a couple of years earlier. India hadn’t gotten into a socialist hell yet, so this was a bit of a surprise. The proximate cause was a fraud that few private life insurers had committed by misusing the policyholders’ funds to help their industrialist friends. A run-of-the-mill white-collar crime that should have been dealt with by the criminal justice system. But the government viewed it as a market failure and moved to nationalise the entire industry. It would take another 45 years for private players to come back to insurance. Insurance penetration in India meanwhile remained among the lowest in the world.  Also, in 1958, Feroze Gandhi took to the floor of Lok Sabha to expose how LIC, the state insurer, had diverted its funds to help Haridas Mundhra, a Calcutta-based businessman. The same crime that private insurers had done.The government would repeat this pattern of getting involved where there was no market failure. The outcomes would inevitably turn out to be worse. Seven decades later, we remain instinctively socialist and wary of capital. Our first reaction to something as trifling as a surge price by Ola or a service charge levied by restaurants is to ask the State to interfere.1959“The longest guest of the Indian government”, the 14th Dalai Lama pre-empted the Chinese government’s plans for his arrest and escaped to India. Not only did India provide asylum, but it also became home to more than a hundred thousand Tibetans. Because of the bold move by the Indian government in 1959, the Central Tibetan Administration continues its struggle as a Nation and a State in search of regaining control over their Country to this day. This event also changed India-China relations for the decades to come.1960Search as hard as we might; we hardly got anything worth discussing for this year. Maybe we were all sitting smugly waiting for an avalanche of crisis to come our way. Steel plants, dams and other heavy industries were being opened. The budget outlay for agriculture was reduced. We were talking big on the international stage about peace and non-alignment. But if you had looked closer, things were turning pear-shaped. The many dreams of our independence were turning sour.The 60s: Souring Of The Dream1961The Indian Army marched into Goa in December 1961. The 450-year Portuguese colonial rule ended, and the last colonial vestige in India was eliminated. It took this long because Portugal’s dictator Antonio Salazar stuck to his guns on controlling Portuguese colonies in the subcontinent, unlike the British and the French. Portugal’s membership in NATO further made it difficult for the Indian government to repeat the operations in Hyderabad and Junagadh. Nevertheless, that moment eventually arrived in 1961. This was also the year when India’s first indigenous aircraft, the HAL HF-24 Marut, took its first flight. Made in Bengaluru by German designer Kurt Tank, the aircraft was one of the first fighter jets made outside the developed world. The aircraft served well in the war that came a decade later. It never lived up to its promises, but it became a matter of immense pride and confidence for a young nation-state.1962Among the lowest points in the history of independent India. We’ve written about our relationship with China many times in the past editions. The 1962 war left a deep impact on our psyche. We didn’t recover for the rest of the decade. The only good thing out of it was the tempering of idealism in our approach to international relations. That we take a more realist stance these days owes its origins to the ‘betrayal’ of 1962.1963ISRO launched the first sounding rocket in November 1963. Over the years, this modest beginning blossomed into a programme with multiple launch vehicles. The satellite programmes also took off a few years later, making India a mighty player in the space sector. 1964If you told anyone alive in 1964 that less than 60 years later, Nehru would be blamed for all that was wrong with India by a substantial segment of its population, they would have laughed you out of the room. But here we are in 2022, and there’s never a day that passes without a WhatsApp forward that talks about Nehru’s faults. It seems inevitable that by the time we celebrate the centenary of our independence, he would be a borderline reviled figure in our history. But that would be an aberration. In the long arc of history, he will find his due as a flawed idealist who laid the foundation of modern India. 1964 was the end of an era.1965As the day when Hindi would become the sole official language of the Indian Union approached, the anti-Hindi agitation in the Madras presidency morphed into riots. Many people died in the protests, and it led to the current equilibrium on language policy. The “one State, one language” project moved to the back burner, even as Hindi became an important link language across the country. The lesson was the same as in the case of the 1956 states reorganisation: melding our diversity into a single identity cannot be a top-down imposition.1966The two wars in the decade's first half, the inefficient allocation of capital driven by the second and third five-year plans, and the consecutive monsoon failure meant India was on the brink in 1966. The overnight devaluation of the Rupee by over 50 per cent, the timely help with food grains from the US and some providence pulled us back from it. The green revolution followed, and we have remained self-sufficient in food since.The experience of being on the brink taught us nothing. We still believe in the Pigouvian theory of market failure, where government policies are expected to deliver optimality.  Strangely, the idea that we reform only in crisis has only strengthened. There cannot be worse ways to change oneself than under the shadow of a crisis. But we have made a virtue out of it.1967This was the year when the Green Revolution took baby steps, and the Ehlrichian prediction about India’s impending doom was put to rest. But it was also the year when the Indian government made a self-goal by adopting a policy called items reserved for manufacture exclusively by the small-scale sector. By reserving whole product lines for manufacturing by small industries, this policy kept Indian firms small and uncompetitive. And like all bad ideas, it had a long life. The last 20 items on this list were removed only in April 2015. We wrote about this policy here. 1968In the past 75 years, we have reserved some of our worst public policies for the education sector. We have an inverted pyramid. A handful of tertiary educational institutions produce world-class graduates at the top. On the other end, we have a total failure to provide quality primary education to the masses. It is not because of a lack of intent. The National Education Policy (NEP) that first came up in 1968 is full of ideas, philosophy and a desire to take a long-term view about education in India. But it was unmoored from the economic or social reality of the nation. We often say here that we shouldn’t judge a policy based on its intentions. That there’s no such thing as a good policy but bad implementation because thinking about what can work is part of policy itself. NEP is Exhibit A in favour of this argument.1969 The nationalisation of 14 private-sector banks was a terrible assault on economic freedom under the garb of serving the public interest. The sudden announcement of a change in ownership of these banks was challenged in the courts, but the government managed to thwart it with an ordinance. Fifty years later, we still have low credit uptake even as governments continue to recapitalise loss-making banks with taxpayer money.1970The dominant economic thinking at the beginning of the 70s in India placed the State at the centre of everything. But that wasn’t how the world was moving. There was a serious re-examination of the relationship between the State and the market happening elsewhere. The eventual shift to a deregulated, small government economic model would happen by the decade's end. This shift mostly passed India by. But there were a few voices who questioned the state orthodoxy and, in some ways, sowed the intellectual seeds for liberalisation in future. In 1970, Jagdish Bhagwati and Padma Desai published their monograph, India: Planning for Industrialisation, which argued that our economic policies since independence had crippled us. It showed with data how central planning, import substitution, public sector-led industrial policy and license raj have failed. But it found no takers. In fact, we doubled down on these failed policies for the rest of the decade. It was a tragedy foretold. What if someone had gone against the consensus and paid attention to that paper? That dissent could perhaps have been the greatest service to the nation. It is useful to remember this today when any scepticism about government policies is met with scorn. Dissent is good. The feeblest of the voice might just be right.The 70s: Losing The Plot1971Kissinger visited China in July 1971 via Pakistan. Responding to the changing world order, India and the USSR signed an Indo–Soviet Treaty of Peace, Friendship and Cooperation in August of that year. India had become an ally of the USSR. Four months later, the India-Pakistan war pitted India and the USSR against Pakistan, China, and the US. The Indian strategic community came to internalise USSR as a super-reliable partner and the West as a supporter of India’s foes. It took another three decades, and the collapse of the USSR, for a change in this thinking. Even today, Russia finds massive support in the Indian strategic establishment. We had problematised this love for Russia here. 1972India won the 1972 war with Pakistan and liberated Bangladesh. India’s unilateral action stopped a humanitarian disaster. The victory was decisive, and the two parties met in Simla to agree on the way forward. This should have been a slam dunk for India in resolving festering issues on the international boundary, Kashmir and the role of the third parties. But international diplomacy is a two-level game, and Bhutto played that to his advantage. We explained this in edition 30. We paid a high price for giving away that win to Bhutto.1973The Kesavananda Bharti verdict of the Supreme Court rescued the Republic of India from a rampaging authoritarian. The basic structure doctrine found a nice balance to resolve the tension between constitutional immutability and legislative authority to amend the constitution. Bibhu Pani discussed this case in more detail here. 1974You are the State. Here are your crimes. You force import substitution, you regulate the currency, you misallocate capital, you let the public sector and a handful of licensed private players produce inferior quality products at a high cost, you raise the marginal tax rate at the highest level to 97 per cent, you run a large current account deficit, and you cannot control Rupee depreciation.Result?People find illegal ways to bring in foreign goods, currency and gold. And so was born the villain of every urban Bollywood film of the 70s. And a career option for a capitalist-minded kid like me. The Smuggler.But the State isn’t the criminal here. The smuggler is. And the State responded with a draconian law to beat all others. An act the knowledge of whose expanded form would serve kids well in those school quizzes of the 80s. COFEPOSA — The Conservation of Foreign Exchange and Prevention of Smuggling Act. A predatory state's defining feature is how it forces ordinary citizens to do unlawful activities. COFEPOSA was the mother of such laws. It has spawned many children. 1975This blank editorial by the Indian Express says it all. 1976We view our population as a core problem. The politicians, the public servants and the ordinary citizens share this view. We don’t want to acknowledge our governance deficit. Calling population a problem allows us to shirk the responsibility of running a functioning State. We have written about the flaw in thinking about the population as a problem on many occasions.How far could we go to control the population? Well, in 1976, during the peak of the Emergency, the State decided to sterilise male citizens against their wishes. This madness ended when the Emergency was lifted. But even today calls for population control keep coming back. 1977The first non-Congress union government was an important milestone for the Indian Republic. While Morarji Desai’s government did reverse the worst excesses of the Emergency rule, its economic policies were less successful. This period went on to witness a demonetisation in search of black money (2016 from the future says Hi!), and the same old counter-productive policies in search of self-reliance.1978Despite all available evidence that statist socialism was an abject failure, the Janata government that came to power decided to double down on it. One of the great ideas of the time was to force MNCs to reduce their stake in their Indian subsidiaries to below 40 per cent. A handful agreed, but the large corporations quit India. One of those who left was IBM in 1978. The many existing installations of IBM computers needed services and maintenance. In a delightful case of unintended consequences, this led to the nationalisation of IBM’s services division (later called CMC). Domestic companies started to serve this niche. Soon there were the likes of Infosys, Wipro and HCL building a business on this. CMC provided a good training ground for young engineers. And so, the Indian IT services industry got underway. It would change the lives of educated Indians forever.1979In a classic case of violating the Tinbergen rule, the Mandal Commission recommended that the reservation policy should be used to address relative deprivation. While the earlier reservations for oppressed castes stood on firm ground as a means for addressing unconscionable historical wrongs, the Mandal Commission stretched the logic too far. Its recommendation would eventually make reservation policy the go-to solution for any group that could flex its political muscles. We wrote about it here. 1980After ditching the Janata experiment and running out of ideas to keep Jan Sangh going, the BJP was formed. It wasn’t a momentous political occasion of any sort then. A party constitution that aimed for Gandhian socialism and offered vague promises of a uniform civil code and nationalism didn’t excite many. Everything else that would propel the party in later years was to be opportunistic add-ons to the ideology. The founding leaders, Advani and Vajpayee, would have been shocked if you told them what the party would be like, four decades later.The 80s: A Million Mutinies Now1981This year witnessed a gradual shift away from doctrinaire socialism in economic policymaking. “The Indira Gandhi government lifted restrictions on the expansion of production, permitted new private borrowing abroad, and continued the liberalisation of import controls,” wrote Walter Anderson. The government also “allowed” some price rises, leading to increased production of key input materials. The government also permitted foreign companies to compete in drilling rights in India. All in all, a year that witnessed changes for the better. 1982The great textile strike of Bombay in 1982 was inevitable. The trade unions had gotten so powerful that there was a competitive race to the bottom on who could be more militant. Datta Samant emerged intent on breaking the monopoly of RMMS on the city's workers. And he did this with ever spiralling demands from mill owners in a sector that was already bloated with overheads and facing competition from far eastern economies. There was no way to meet these demands. The owners locked the mills and left. Never to come back. The old, abandoned mills remained. The workers remained. Without jobs, without prospects and with kids who grew up angry and unemployed. The rise of Shiv Sena, political goondaism and a malevolent form of underworld followed. Bombay changed forever. It was all inevitable.1983The Nellie massacre in Assam and the Dhilwan bus massacre in Punjab represent the year 1983. Things seemed really dark back then. It seemed that the doomsayers would be proved right about India. Eventually, though, the Indian Republic prevailed. 1984Her Sikh bodyguards assassinated India Gandhi. The botched Punjab policy of the previous five years came a full circle with it. An unforgivable backlash against innocent Sikhs followed. A month later, deadly gas leaked out of a Union Carbide factory in Bhopal, killing and paralysing thousands. 1984 will rank among the worst years of our republic. There were two silver linings in retrospect. One, we would learn to manage secessionist movements better from the harrowing Punjab experience. Two, had Indira continued, would we have had 1991? Our guess is no.1985This was an eventful year in retrospect. Texas Instruments set up shop in Bangalore. It was to begin one of modern India’s true success stories on the world stage. This was also the year when the Anti-defection law transformed the relationship between the voter and her representative. Political parties became all-powerful, and people’s representatives were reduced to political party agents. We have written about this changing dynamic here. This was also the year when the then commerce minister, VP Singh, visited Malaysia. The visit was significant for India because it served as a reference point for Singh when he visited that country again in 1990, now as the Prime minister. Surprised by Malaysia’s transformation in five years, he asked his team to prepare a strategy paper for economic reforms. This culminated in the “M” document, which became a blueprint for reforms when the time for the idea eventually came in 1991.1986Who is a citizen of India?  This vexing question roiled Assam in the early 80s. The student union protests against the widespread immigration of Bangladeshis turned violent, and things had turned ugly by 1985. The Assam accord of 1985 sought to settle the state's outstanding issues,, including deporting those who arrived after 1971 and a promise to amend the Citizenship Act. The amended Citizenship Act of 1986 restricted the citizenship of India to those born before 1987 only if either of their parents were born in India. That meant children of couples who were illegal immigrants couldn’t be citizens of India simply by virtue of their birth in India. That was that, or so we thought.But once you’ve amended the definition of who can be a citizen of India, you have let the genie out. The events of 2019 will attest to that.1987Rajiv Gandhi’s ill-fated attempt to replicate Indira Gandhi’s success through military intervention in another country began in 1987. In contrast to the 1971 involvement, where Indian forces had the mass support of the local populace, the Indian Peacekeeping Force (IPKF) got itself embroiled in a bitter Sri Lankan civil war. Not only did this involvement end in a failure, it eventually led to Rajiv Gandhi’s brutal murder in a terrorist attack. The policy lesson internalised by the strategic community was that India must stay far away from developing and deploying forces overseas.1988Most government communication is propaganda in disguise. However, there are those rare occasions when government messaging transcends the ordinary. In 1988, we saw that rare bird during the peak era of a single government channel running on millions of black and white TV sets across India. A government ad that meant something to all of us and that would remain with us forever. Mile Sur Mera Tumhara got everything right - the song, the singers, the storyline and that ineffable thing called the idea of India. No jingoism, no chest beating about being the best country in the world and no soppy sentimentalism. Just a simple message - we might all sing our own tunes, but we are better together. This is a timeless truth. No nation in history has become better by muting the voice of a section of their own people. Mile Sur Mera Tumhara, Toh Sur Bane Hamara, indeed.  19891989 will be remembered as the year when the Indian government capitulated to the demands of Kashmiri terrorists in the Rubaiya Sayeed abduction case. It would spark off a series of kidnappings and act as a shot in the arm of radicals. 1990VP Singh dusted off the decade-long copy of the Mandal Commission report and decided to implement it. This wasn’t an ideological revolution. It was naked political opportunism. However, three decades later, the dual impact of economic reforms and social engineering has increased social mobility than ever before. Merit is still a matter of debate in India. But two generations of affirmative action in many of the progressive states have shown the fears of merit being compromised were overblown. The task is far from finished, but Mandal showed that sometimes you need a big bang to get things going, even if your intentions were flawed.1990 also saw the exodus of Kashmiri Pandits (KPs) from the valley. A tragedy that would bookend a decade of strife and violence in India. The only lesson one should draw from the sad plight of KPs is that the State and the people must protect minority rights. We’re not sure that’s what we have taken away from it. And that’s sad.The 90s: Correcting The Course1991With the benefit of hindsight, the 1991 economic reforms seem inevitable. But things could well have been different. In the minority government, powerful voices advocated in favour of debt restructuring instead of wholesale reforms. In the end, the narrative that these changes were merely a continuation—and not abandonment—of Nehru and Indira Gandhi’s vision for India carried the day. This political chicanery deserves some credit for transforming the life of a billion Indians. 1992Harshad Mehta scammed the stock markets. It wasn’t a huge scam. Nor did it hurt the ordinary Indians. Fewer than 1% invested in markets back then. Yet, the scam did something important. It set in motion a series of reforms that made our capital markets stronger and safer for ordinary investors. Notably, over the years, Mehta came to be seen as some kind of robber baron figure. Capitalism needed an anti-hero to catch the imagination of people. Someone who could reprise in the 90s the Bachchan-esque angry young man roles of the 70s. Mehta might not have been that figure exactly, but he helped a generation transition to the idea that greed could indeed be good.Also, Babri Masjid was brought down by a mob of kar sevaks in 1992. It will remain a watershed moment in our history. The Supreme Court judgement of 2019 might be the final judicial word on it. But we will carry the scars for a long time.1993The tremors of the demolition of the Babri Masjid were felt in 1993. Twelve bombs went off in Bombay on one fateful day. The involvement of the city’s mafia groups was established. The tragic event finally led to the government rescuing the city from the underworld. Not to forget, the Bombay underworld directly resulted from government policies such as prohibition and gold controls. 1994One of the great acts of perversion in our democracy was the blatant abuse of Section 356 of the constitution that allowed the union to dismiss a state government at the slightest pretext. Indira Gandhi turned this into an art form. S. R. Bommai, whose government in Karnataka was dismissed in this manner in 1988, took his case up to the Supreme Court. In 1994, the court delivered a verdict that laid out the guidelines to prevent the abuse of Section 356. It is one of the landmark judgments of the court and restored some parity in Union and state relationship.Article 356 has been used sparingly since. We are a better democracy because of it.1995India joined the WTO, and the first-ever mobile phone call was made this year. But 1995 will forever be remembered as the year when Ganesha idols started drinking milk. This event was a precursor to the many memes, information cascades, and social proofs that have become routine in the information age. 1996Union budgets in India are occasions for dramatic policy announcements. It is a mystery why a regular exercise of presenting the government's accounts should become a policy event. But that’s the way we roll. In 1996 and 1997, P. Chidambaram presented them as the FM of a weak ragtag coalition called the United Front. But he presented two budgets for the ages. The rationalisation of income tax slabs and the deregulation of interest rates created a credit culture that led to the eventual consumption boom in the next decade. We still carry that consumption momentum.1997The creation of the Telecom Regulatory Authority of India (TRAI) is an important public policy milestone for India. By no means perfect, the setting up of TRAI helped overturn a norm where government departments were both players and umpires. TRAI made the separation of “steering” and “rowing” functions a new normal. That template has been copied in several sectors thereafter, most recently in the liberalisation of the space sector. 1998India did Pokhran 2, which gave it the capability to build thermonuclear weapons. We faced sanctions and global condemnation. But the growing economy and a sizeable middle class meant those were soon forgotten. Economic might can let you get away with a lot. We have seen it happen to us, but it is a lesson we don’t understand fully.Also, in 1998, Sonia Gandhi jumped into active politics. The Congress that was ambling towards some sort of internal democracy decided to jettison it all and threw its weight behind the dynasty. It worked out for them for a decade or so. But where are they now? Here’s a question. What if Sonia didn’t join politics then? Congress might have split. But who knows, maybe those splinters might have coalesced in the future with a leader chosen by the workers. And we would have had a proper opposition today with a credible leader.1999This was a landmark year for public policy. For the first time, a union government-run company was privatised wholly. We wrote about the three narratives of disinvestment here. 2000We have a weak, extended and over-centralised state. And to go with it, we have large, unwieldy states and districts that make the devolution of power difficult. In 2000, we created three new states to facilitate administrative convenience. On balance, it has worked well. Despite the evidence, we have managed to create only one more state since. The formation of Telangana was such a political disaster that it will take a long time before we make the right policy move of having smaller states. It is a pity.The 2000s: The Best Of Times2001Not only was the Agra Summit between Musharraf and Vajpayee a dud, but it was followed by a terrorist attack on the Indian parliament. It confirmed a pattern: PM-level bilateral meetings made the Pakistani military-jihadi complex jittery, and it invariably managed to spike such moves with terrorist attacks. 2002There was Godhra and the riots that followed. What else is there to say?2003The Fiscal Responsibility and Budget Management (FRBM) Act and the Civil Services Pension Reform are two policy successes with many lessons for future policymakers. We have discussed these on many occasions. 2004The NDA government called for an early election, confident about its prospects. India Shining, its campaign about how good things were, wasn’t too far from the truth. It is how many of us felt during that time. The NDA government had sustained the reform momentum of the 90s with some of the best minds running the key departments. Its loss was unexpected. Chandrababu Naidu, a politician who fashioned himself like a CEO, was taken to the cleaners in Andhra Pradesh. Apparently, economic reforms didn’t get you votes. The real India living in villages was angry at being left out. That was the lesson for politicians from 2004. Or, so we were told.Such broad narratives with minimal factual analysis backing them have flourished in the public policy space. There is no basis for them. The loss of NDA in 2004 came down to two states. Anti-incumbency in Andhra Pradesh where a resurgent Congress under YS Reddy beat TDP, a constituent of NDA. TDP lost by similar margins (in vote share %) across the state in all demographics in both rural and urban areas. There was no rural uprising against Naidu because of his tech-savvy, urban reformist image. Naidu lost because the other party ran a better campaign. Nothing else. The other mistake of the NDA was in choosing to partner with the ruling AIADMK in Tamil Nadu (TN) over DMK. TN was famous for not giving split verdicts. It swung to extremes between these two parties in every election. And that’s what happened as AIADMK drew a blank.Yet, the false lesson of 2004 has played on the minds of politicians since. We haven’t gotten back on track on reforms in the true sense. 2005The Right to Information Act and the National Rural Employment Guarantee Act came into force in 2005. The “right to X” model of governance took root.2006In March 2006, George W Bush visited India and signed the Civil Nuclear Cooperation Agreement with Manmohan Singh. From facing sanctions in 1998 for Pokhran 2 to the 123 Agreement, this was a victory for Indian diplomacy and its rising status in the world. You would think this would have had bipartisan support among the political class in India. Well, the Left that was part of UPA and the BJP that worked on the deal when it was in power, opposed it. Many shenanigans later, the deal was passed in the parliament in 2008. It is often said there’s no real ideological divide among parties in India. This view can be contested on various grounds. But events like the opposition to the nuclear deal make you wonder if there are genuine ideological positions on key policy issues in India. Many sound policy decisions are opposed merely for the sake of it. Ideology doesn’t figure anywhere. 2007It was the year when the Left parties were out-lefted. In Singur and Nandigram, protests erupted over land acquisition for industrial projects. The crucible of the resulting violence created a new political force. As for the investment, the capital took a flight to other places. The tax on capital ended up being a tax on labour. Businesses stayed away from West Bengal. The citadel of Left turned into its mausoleum.2008Puja Mehra in her book The Lost Decade traces the origin of India losing its way following the global financial crisis to the Mumbai terror attack of 2008. Shivraj Patil, the home minister, quit following the attack and Chidambaram was shifted from finance to fill in. For reasons unknown, Pranab Mukherjee, a politician steeped in the 70s-style-Indira-Gandhi socialism, was made the FM. Mehra makes a compelling case of how that one decision stalled reforms, increased deficit and led to runaway inflation over the next three years. Till Chidambaram was brought back to get the house in order, it was too late, and we were halfway into a lost decade. It is remarkable how bad policies always seem easy to implement while good policies take ages to get off the blocks.2009The Unique Identification Authority of India (UIDAI) was established in January 2009 to architect a unique digital identity for persons in a country where low rates of death and birth registrations made fake and duplicate identities a means for corruption and denial of service. Under the Modi government, the digital identity — Aadhaar — became the fulcrum of several government services. This project also set the stage for later projects such as the Unified Payments Interface (UPI) and Abha (Health ID).2010There’s petty corruption everywhere in India. It is pervasive. Not surprisingly, it is one political issue leading to mass movements in India. The anti-corruption mood gripped India in 2010 on the back of the 2G spectrum scam, where the chief accountant of the government claimed a notional loss of about Rs. 1.8 trillion to the exchequer. Auctioning of natural resources wasn’t exactly a transparent process then. It was evident there was a scam in the allotment of the 2G spectrum. But the 1.8 trillion number was a wild exaggeration that anyone with a semblance of business understanding could see through. It didn’t matter. That number caught the imagination. UPA 2 never recovered from it. More importantly, the auction policy for resources was distorted forever. We still suffer the consequences.The 2010s: Missed Opportunity2011India’s last case of wild poliovirus was detected in 2011. Until about the early 1990s, an average of 500 to 1000 children got paralysed daily in India. The original target for eradication was the year 2000. Nevertheless, we got there eleven years later. India’s pulse polio campaign has since become a source of confidence for public policy execution in India. We internalised the lesson that the Indian government can sometimes deliver through mission mode projects. 2012If you cannot solve a vexing public policy issue, turn it into a Right. It won’t work, but it will seem like you’ve done everything. After years of trying to get the national education policy right, the government decided it was best to make education a fundamental right in the Constitution. Maybe that will make the problem go away. A decade later, nothing has changed, but we have an additional right to feel good about.2013This year saw the emergence of AAP as a political force via the anti-corruption movement. AAP combines the classic elements of what makes a political party successful in India - statist instincts, focus on aam aadmi issues, populism and ideological flexibility. Importantly, it is good at telling its own version of some future utopia rather than questioning the utopia of others. 2014The BJP came to power with many promises; the most alluring of them was ‘minimum government, maximum governance’. Over the past eight years it has claimed success in meeting many of its promises, but even its ardent supporters won’t claim any success on minimum government. In fact, it has gone the other way. That a party with an immensely popular PM, election machinery that rivals the best in the world, and virtually no opposition cannot shake us off our instinctive belief in the State's power never ceases to surprise us.2015The murder of a person by a mob on the charges of eating beef was the first clear indication of the upsurge of a new violent, majoritarian polity. It was also one of the early incidents in India of radically networked communities using social media for self-organisation. Meanwhile, 2015 also witnessed the signing of a landmark boundary agreement between India and Bangladesh, which ended the abomination called the third-order enclave. The two States exchanged land peacefully, upholding the principle that citizen well-being trumps hardline interpretations of territorial integrity. 2016There will be many case studies written in future about demonetisation. Each one of them will end with a single conclusion. Public policy requires discussion and consensus, not stealth and surprise. We hope we have learnt our lesson from it.2017Until 2017, many in India still held the hope of a modus vivendi with China. Some others were enamoured by the Chinese model of governance. However, the Doklam crisis in 2017, and the Galwan clashes in 2020, changed all that. Through this miscalculation, China alienated a full generation of Indians, led to better India-US relations, and energised India to shift focus away from merely managing a weak Pakistan, and toward raising its game for competing with a stronger adversary. For this reason, we wrote a thank you note to Xi Jinping here. 2018It took years of efforts by the LGBTQ community to get Section 377 scrapped. In 2018, they partially won when the Supreme Court diluted Section 377 to exclude all kinds of adult consensual sexual behaviour. The community could now claim equal constitutional status as others. There’s still some distance to go for the State to acknowledge non-heterosexual unions and provide for other civil rights to the community. But the gradual acceptance of the community because of decriminalisation is a sign that our society doesn’t need moral policing or lectures to judge what’s good for it.2019The J&K Reorganisation Act changed the long-standing political status quo in Kashmir. Three years on, the return to political normalcy and full statehood still awaits. While a response by Pakistan was expected, it was China that fomented trouble in Ladakh, leading to the border clashes in 2020. 2020We have written multiple pieces on farm laws in the past year. The repeal of these laws, which were fundamentally sound because of a vocal minority, is the story of public policy in India. Good policies are scuttled because of the absence of consultation, an unclear narrative, opportunistic politicking or plain old hubris. We write this newsletter in the hope of changing this. 2021The second wave of the COVID-19 pandemic left behind many bereaved families. People are still trying to pick up the pieces. The sadness was also interrupted by frustration because of the delays in getting the vaccination programme going. India benefited immensely from domestic vaccine manufacturing capability in the private sector. Despite many twists and turns in vaccine pricing and procurements, the year ended with over 1 billion administered doses. In challenging times, the Indian State, markets, and society did come together to fight the pandemic. So, here we are. In the 75th independent year of this beautiful, fascinating and often exasperating nation. We are a work in progress. We might walk slowly, but we must not walk backwards. May we all live in a happy, prosperous and equal society. Thanks for reading Anticipating the Unintended! Subscribe for free to receive new posts and support our work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit publicpolicy.substack.com

Even as PM Modi publicly distinguishes between Revadis (Freebies) and empowerment, the Supreme Court has given the freebie culture in the PIL of Hindu Sena. Today it ordered suggestions for forming a panel to curb freebies with RBI, Niti Ayog, Finance Commission and ECI. Sanjay Dixit gives his perspective.

Experience Sharing

With the central government increasing its hold over the states in administrative, financial, and legislative domains, experts warn against the steady dilution of federalism and its multifold consequences. When it comes to financial matters, they contend that "one nation one tax" under the GST regime has made states heavily dependent on the Centre for release of dues.In law-making, every second bill proposed by parliament is opposed by the states as encroaching on state subjects, for instance, the contentious farmers laws, dam safety law; the list goes on. During the pandemic, states complained the directions issued by the Central government made the states appear as subordinate partners. Many fear that federal space shrunk to the detriment of the constituent states.  On the other hand, supporters of a strong Central government defend this 'asymmetrical federalism', by stating that only a strong Centre can ensure political stability, and not cave into polarising and secessionist forces. Moreover, because of India's massive cultural heterogeneity and threats to national security, proponents deem this arrangement as necessary for the very survival of the nation. What do such Centre-state entanglements say about India's federalism? And what should we be batting for - a more federalised structure or a stronger Centre?  DISCLAIMERWe invite thought leaders from across the ideological spectrum. The guests in our sessions express their independent views and  opinions. Argumentative Indians does not profess to subscribe, agree or endorse the same or be in anyway responsible for the stance, words and comments of our guests. PANELISTS:Mr. N K SinghSeasoned bureaucrat, Leading Economist, Prominent Politician - Bhartiya Janta Party, Former member of Rajya Sabha, and presently the head of 15th Finance Commission of India. Formerly, he was a member of the Planning Commission and handled assignments of Union Expenditure and Revenue Secretary. He was also an Officer on Special Duty to Prime Minister Atal Bihari Vajpayee.Mr. Praveen ChakravartyEminent Political Economist, Leading Columnist, Chairman of the Data Analytics department, and Senior Office Bearer, Indian National Congress. He has co-authored with former Prime Minister Dr. Manmohan Singh, former Finance Minister P. Chidambaram and many others. He has served in the Unique Identity Project (Aadhaar) and in the National Skills Development Agency.Ms. Avani KapurLead, Accountability Initiative, working towards Responsive Governance and Fellow, Centre for Policy Research. She leads research studies on fiscal federalism, health, nutrition, sanitation, and education financing.Dr. Niranjan SahooSenior Fellow, Governance and Politics Initiative, ORF and South Asia member for the Carnegie Rising Democracies Network. He writes on governance reforms, federalism, decentralisation, service delivery, electoral reforms, democracy, human rights, insurgencies, affirmative action and social exclusion.Dr. Wilfried Swenden- Senior Professor of Indian and South Asian Politics, University of Edinburgh, and foremost expert on multi-level governance and federalism. He co-convened the ECPR Standing Group on Federalism and Regionalism, the largest European network in the field of territorial politics and he was also Vice-Chair of IPSA RC28, Research Committee on Comparative Federalism and Multi-Level Governance, International Political Science Association.Explore More at - www.argumentativeindians.comDISCLAIMER:We invite thought leaders from across the ideological spectrum. The guests in our sessions express their independent views and opinions. Argumentative Indians does not profess to subscribe, agree or endorse the same or be in anyway responsible for the stance, words and comments of our guests.

In an address delivered at the Delhi School of Economics last week, N.K. Singh, the chairperson of the 15th Finance Commission, warned about how the race to provide freebies to voters could be a “quick path to fiscal disaster.” He also noted that freebies could be harmful for the long-term economic growth of the country and emphasised the need to distinguish between productive and unproductive forms of welfare spending. Here we discuss whether there is a case for doing away with freebie culture. Guests: Himanshu, Associate Professor at the Jawaharlal Nehru University, New Delhi; Renu Kohli, an independent economist who has worked at the International Monetary Fund and the Reserve Bank of India Host: Prashanth Perumal Read the parley article here

After a long pause, retail fuel prices have been inching up over the past week and have crossed the ₹100 per litre-mark again in several parts of the country, while LPG cylinder prices have been hiked by ₹50. India officially has a deregulated pricing regime, but in recent years, this practice has been put on hold during election campaigns. Here we discuss whether the fuel pricing policy is problematic. Guests: D.K. Srivastava, chief policy advisor at EY India, former director of the Madras School of Economics, and member of the 12th Finance Commission; S.C. Sharma, former adviser (petroleum) at the erstwhile Planning Commission and has worked extensively on India's energy challenges Host: Vikas Dhoot Read the parley article here

This week Joel and John from Lawgistics join Rebecca and Batch. Find out more about the stories mentioned by clicking below. Extinction Rebellion protesters disrupt election campaign launch at luxury car dealership Joe Macari Dealership giant Pendragon throws out secret £400m takeover bid by largest shareholder Hedin Group Undercover report finds DVLA staff lounged in bed watching Netflix while backlogs hit record levels Used car dealer must pay out thousands for selling Subaru that had dodgy brakes and severe corrosion Nissan to end GT-R sales in Europe after 13 years due to strict new noise laws Inchcape to drop Russian operations completely in wake of Ukraine invasion --- Send in a voice message: https://anchor.fm/car-dealer-magazine/message

This week's episode has us speaking with Tristan Pelloux of Fintech Review regarding the latest investment opportunities and pulse in Fintech from crypto to BAS (banking as a service). Tristan is an entrepreneur that comes from the corporate world, having been in Corporate Strategy for Virgin Money in the UK as placed in a Directorship by the Chair of Finance Commission, leaving it behind to be more in control of his destiny and to make more of an impact and difference. To keep up to date with Tristan go here: https://fintechreview.net/about-finte... Want to be an EntrePod? It's Free! Go Here: https://bit.ly/3i9814W Love what you're hearing? Let us know: https://lovethepodcast.com/entrepods Follow Us! https://followthepodcast.com/entrepods EntrePods is on most listening platforms, YouTube and AsgardiaTV!

Matsyanyaaya: Not So Great Game Theory in AfghanistanBig fish eating small fish = Foreign Policy in action— Guest Post by Ameya NaikUS intelligence agencies considered it likely that the Taliban would retake control of all or most of Afghanistan following US withdrawal. Their estimate, however, was that this would take weeks or even months; the idea that Kabul would fall in a matter of days was considered a worst-case scenario. Now that the worst case has played out, analysts are scrambling to explain why. One narrative thus has it that ANA was so poorly-trained - and its leadership so corrupt - that once U.S. military contractors left the field, Afghan forces had neither the motivation nor the acumen to resist the Taliban advance. As President Biden himself put it "...we could not provide them... the will to fight."To test that claim, we can turn to Game Theory.Game Theory stylises any decision involving two or more players as a "game". Each player can receive some "payoff" (or outcome) from the game. Payoffs are "contingent", i.e. the payoff a player receives depends partly on their own decisions, partly on the decisions of the other player or players. One assumes players will act rationally, making choices that maximise their payoffs. Thus, if we know the payoffs each player can receive, we can predict their choices, and thereby also the outcome of the game.The most famous example of this is the Prisoner’s Dilemma: a game in which two people suspected of committing a crime are being questioned independently. If both deny committing any crime, the authorities will only be able to convict them of a minor offence (slightly bad outcome). However, if one of them bears witness against the other, the authority will let the snitch go free (best outcome) while convicting the other of a major offence (worst outcome). The textbook prediction is that both suspects will crack, and wind up with the worst combination of outcomes. However, the classical Prisoner's Dilemma is limited in one important way: it is a single-turn game. The players only make a choice once, at the same time, without knowledge of each others' choices - and then the game ends. A more realistic scenario is what is known as a repeated game. A repeated game has multiple turns: the same players interact, under the same rules, with knowledge of the choice made by the other players in the previous turn. Imagine that the suspects are schoolchildren and the authority is the Principal of the school. No one is going to jail; even if neither child knows what the other is saying to the Principal, they do know they will both interact on multiple occasions thereafter, both in class and outside it. Even with the same payoff structure, the outcome starts to look different: knowing that we have to meet the other person every day makes us far less likely to crack - or "defect", in game theory jargon - because they could punish our defection on the next turn. In a repeated game, players make decisions "in the shadow of the future".The political scientist Robert Axelrod modelled a repeated game in The Evolution of Cooperation. He demonstrates that the optimal strategy for such games is what he calls "Nice Tit-for-Tat".Start by complying (being nice to the other player)If they comply, continue complying (happily ever after)If they defect, punish them by defecting on your next turn.If they respond to your defection by complying, they have accepted the punishment, so go back to complying again.If they defect again, you should also defect again (Tit-for-Tat) - a downward spiral until and unless they switch to complying.A key insight from Axelrod's work is that this strategy only works if the total number of turns is unknown. Why? If the number of turns is known, we can try to pull a fast one - complying until the penultimate turn, but then defecting on the very last one (turn N), when there is no possibility of punishment thereafter.The other player is not a fool. They know we are likely to defect on the final turn, so they will take precautions: they will defect preemptively, on the penultimate turn (N-1). Since we know they will do this, we will defect on the turn before that (N-2). They know we will do this, so they will defect on the turn before that one (N-3) - and so on till the whole chain unravels.The deterrence of future punishment only works if the number of turns is unknown. We can think of this as an infinite game or at least an indefinite one.What does all this have to do with Afghanistan? When President Trump committed to pulling out U.S. troops by a specific date, and then when President Biden made clear he would uphold that commitment (even with a different date), they converted an infinite game into a finite one. An open-ended U.S. presence was a signal of potentially unending US involvement, complete with punishment for behaviour the US considered unacceptable - for instance, overthrowing the US-supported government in Kabul.Afghan leaders broadly shared the assessment of the U.S. intelligence agencies: the Afghan government could not survive if US support was withdrawn. (Whether this is objectively true is beside the point; it seems to have been the mental model of the Afghan provincial governors, military leaders, and in all likelihood Afghan soldiers themselves.) With withdrawal confirmed, why bother resisting - especially given the Taliban's inhuman tactics, including targeting family members of soldiers, and threatening reprisal killings once they take power?Once the average Afghan believed that a Taliban victory was inevitable, the finite game unravelled. Players chose to defect (surrender / retreat / literally defect to the Taliban) at every step, and the timeline towards the fall of Kabul accelerated dramatically.Biden is precisely wrong. The US was providing Afghan leaders and forces with the will to fight, not by training and equipping them, but by making the prospect of a Taliban victory impossible. Given U.S. domestic sentiment favoured withdrawal, a better question might have been: even without a U.S. military presence on the ground, could the US establish deterrence against the Taliban?India Policy Watch #1: NMP, Another Gamechanger? Insights on burning policy issues in India— RSJThe Union government this week announced a National Monetisation Pipeline (NMP) with the aim to unlock value in existing infrastructure projects. The idea is simple and draws from the pioneering “Asset Recycling Initiative” done in Australia between 2013-16. Select assets that are already generating revenues (like roads, railway stations, power plants), lease them out to private sector bidders for a defined period, transfer the revenue rights to them, take an upfront payment for the lease, work out some revenue share arrangement on an ongoing basis, and have a few checks and balances to ensure the private sector doesn’t gouge the consumers on pricing or runs the asset to the ground over the years. That’s it.  The government expects to raise ₹6 lakh crores in the next four years from this which it will use to fund greenfield infrastructure projects. To make sense of this number, the Union budget size this year was around ₹35 lakh crores. In the speech, the FM had reiterated the intent to spend ₹110 lakh crores over the next 4 years to create a National Infrastructure Pipeline. About 85% of that amount was to be raised through the traditional sources of capital (government borrowings) and the balance was to be taken up through innovative mechanisms. One such mechanism was the creation of a new Development Finance Institution (DFI) which would build a lending portfolio of ₹5 lakh crores in three years. The other mechanism is the NMP announced this week. So, what do I think of this? Let’s look at the reasons for doing this. Our economic engine was slowing down even before the pandemic. Things have gotten worse since. The government can manage to keep its base in thrall with its favourite social and cultural issues for a while but the hard economic realities will eventually bite. This is true even for this government regardless of their narrative building skills. We have a yawning infrastructure deficit in the country. It is a prerequisite for growth. Investment in infrastructure has a tremendous multiplier effect and it has the potential to generate new jobs.  The government has to take the lead in starting the Capex cycle. The private sector has burnt its fingers in the last decade and huge NPAs in the banking system are proof of it. The private sector, for all its vociferous support to all government initiatives, has barely contributed to the gross capital formation in the last decade. The interest rates globally are at an all-time low and there’s a capital glut everywhere. China is no longer a safe option with its crackdown on private capital. There’s no better time for India to raise capital. The government has limited fiscal space given the impact of the pandemic on its revenues. It is looking for ways to raise funds without widening the deficit further. India isn’t considered a great destination for launching greenfield projects. The state is capricious and the ease of doing business isn’t great. So, the best option is to offer brownfield projects for monetisation. They are less risky because they are already ‘live’ and, possibly under-utilised. The idea is to have the private sector come in with better quality resources and efficiencies to generate an incremental return over what these projects were already doing. The government receives its ‘fair share’ and the private sector ‘sweats’ the asset more efficiently to make its returns. Win-win for all. An outright sale of these assets is out of the question. It will be politically untenable even within the BJP. A long term lease might be as good as a sale considering many of these assets won’t have that kind of a lifetime. But lease sounds politically more palatable than sale in a country that’s reflexively socialist. It is difficult to argue with the rationale above. This is not one of those instances in public policy where everyone is clamouring let’s do something; this looks like something; so, let’s do this. The solution arrived at fits the problem statement. That is not a bad start when you look at the history of ‘gamechanger’ moves of this government.  But the usual arguments against it have been made in the past few days. Let me run through them: “We are handing over our core national assets to the private sector or foreigners.” This is quite bizarre. This is a lease and the state, like we have repeated many times over, holds unbelievable powers in India to change the rules of the game midway. In fact, this is one of the reasons why we might have few takers for this programme. The history of raising the foreigner or private sector bogey has done us no good over the years. But this never goes out of fashion. “This will lead to the monopoly of two industrial houses who are already entrenched in this ecosystem.” There is a real danger of this happening. It is likely that we won’t have too many bidders for these assets or the game is rigged to favour a few industrial houses. The nature of assets being monetised is such that monopolies are natural in them. You have only one 4 lane road to take between two cities, for instance. So, a couple of companies controlling many of these assets could mean exploitative pricing. My counter to this is a bit cynical. We have a problem with monopolies in many sectors regardless of NMP. This has to be countered through anti-trust laws, debates in parliament, litigation and public awareness. Scuppering NMP won’t change this truth. In fact, a well designed, transparent NMP auction process might allow better funded and more credible options to emerge. That should be the focus here. “This is well-intentioned but implementation will be key.” This is true for everything. Of course, we will need to have more specific details of the assets and their current revenue streams, we will need to provide clarity on how regulatory actions in future don’t impact the financial projections of these assets, we will need safeguards on maintenance and development of these assets when they are under lease and on future pricing of the consumers. The track record of this government isn’t great on implementation after making a big announcement. But that doesn’t mean there should be no attempt to do anything new. My hope is they learn from the past and put a plan that works.  “There should have been consultations and debates in parliament on this.” This is a necessary condition for any initiative of this kind. The private sector bidders are looking for stability in their revenue stream for a long duration (25 years or more). They will be reassured if they were to see a broader consensus across the political spectrum on this. The ability of the state governments led by those in opposition to throw legal or regulatory spanners in the works in the future shouldn’t be underestimated. The Union government would have made it easier for everyone by at least making an effort to have a discussion with the states and other political parties. But that ship has unfortunately sailed a long time back. This isn’t a government that believes in such niceties and any attempt to start now isn’t going to take it anywhere. This is the great tragedy of our current times. We cannot agree on a good idea in good faith. The Union government holds the can on this one. The pessimist in me expects this ‘big idea’ to follow the same course as other such ideas of this government in the past. Demonetisation, GST, Make In India, Aatmanirbhar Bharat etc. We will have sporadic successes and we will soon forget it and get started on another new thing. That will be a pity. Because we really need a multi-year Capex cycle to get going for our future.India Policy Watch #2: Shivshankar Menon on India And Asian Geopolitics Insights on burning policy issues in India— RSJWhat should be the primary objective of India’s foreign policy? I often ask this question to people who are well-read and have a view on world affairs and India’s place in it. The answers often disappoint me. This isn’t because they are wrong. I mean who can say what’s the right answer for such questions. It is because they don’t give an answer that I think is right. Heh! So, imagine my happiness in reading a book where the author and I are on the same page on this vital question. That the author happens to have been a Foreign Secretary and a National Security Advisor of India in the past makes this the newsletter equivalent of “chhota munh, badi baat” on my part.  Anyway, I had written a couple of weeks on The Long Game by Vijay Gokhale and I had mentioned in passing about Shivshankar Menon’s India And Asian Geopolitics: The Past, Present. Menon’s book is a broader analysis of India’s choices in a century where Asia will play a bigger role in the world with the inevitable rise of China. It is a deeply insightful and richly argued book. Menon is an old school liberal with a keen intellect, a comprehensive understanding of geopolitics and a believer in the values on which the modern Indian state was founded. I have taken a few extracts from his book where he discusses the central objective that should guide India’s policy towards the world.  To begin with – what should be the task of our foreign and security policy apparatus and how have we seen ourselves in the global order? Menon writes: “Since Indian independence, the primary function of Indian policy has been the great national task of transforming India into a prosperous, strong, and modern country. The task of the foreign and security policy apparatus is to identify, deter, and defeat threats to national security that could prevent that transformation and to create an enabling environment for India’s transformation. This will remain the nation’s purpose for a long time to come, so long as India has poor, illiterate people who live insecure lives threatened by disease and who cannot fulfil their potential. Why should many Indians live in what Juvenal called ‘a state of ambitious poverty’ which affects all Indian in so many ways? Until recently India has a vision of both its place in the world and of the order it preferred. That was of an order that was rule-based, democratic, and plural, that would assist in the transformation of India. To this end, India saw itself as a responsible stakeholder in the international system, was a willing contributor to international peacekeeping and to solidarity among developing countries, and was an active participant in the multilateral order. India was one of the greatest beneficiaries of globalisation decades.” Menon is no fan of our newfound desire to be a ‘’vishwaguru”. This isn’t because he doesn’t believe in our civilisational values. It is just that he is a realist. No ‘soft power’ of this nebulous kind is going to help us with our objectives. He argues: “For the last few years, however, India seems adrift in terms of a vision of India’s role and place in the world. There has been an obsession with India as “a leading power” and its standing in the international order. Spokespersons for the Modi government have spoken of statecraft as “a battle of civilisations, battle of cultures, basically the battle of minds.” They have also concentrated on India’s civilisational glory and spoke of regaining it, PM Modi has spoken since 2015 of India as a vishwaguru, or world teacher. The idea of vishwaguru probably plays well with Modi’s core Hindu constituency at home but is hardly a realistic goal when contemporary India is a net importer of knowledge, is not known for innovation, and must still do a great deal to spread primary education to its people and raise educational standards to acceptable levels in its institutions of learning. Nor is it clear how vishwaguru status would address the immediate problem of livelihood and security that the Indian people and nation face. Becoming a vishwaguru is hardly the answer to India’s security, economy, and development needs and what they require from the international system. In any case, the first Modi government saw precious little done to move India towards this nebulous goal, which may be just as well.  India is and has been an important player on the world stage with its own interest and will continue to be so. And yet, the purpose of our participation in the international community is not to see how many people we can outdo or push down. It is to uplift our own people and to improve their condition…” And lastly, Menon might be among the last of the dying breed of Nehruvian but he is objective about Nehru’s foreign policy lapses: “The narrative about India as a great power seems driven more by a desire for status and recognition than by the outcomes the quest for great-power status is likely to produce for the Indian people, society, state, the subcontinent, and the world. What is missing is a vision of India’s place in the international system and its goals, as Nehru was able to articulate in his time, even though he was not always entirely in touch with the realities of power and therefore saw some of his policies fail.” The book is a wonderful history of our foreign policy written with insight and passion. You might occasionally disagree with his views but, in the end, you are left in no doubt this is a book written by a man who feels deeply for India. India Policy Watch #3: Today’s EhrlichiansInsights on burning policy issues in India— Pranay KotashaneWe consistently write here on why the oft-repeated narrative that India’s population is the root cause of its ills, is problematic. This week, I came across an excerpt in Jason Crawford’s delightful MIT Tech Review article discussing this narrative. He writes:The 1968 book The Population Bomb, by Paul and Anne Ehrlich, opened with a call for surrender: “The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate.” In 1970, Paul Ehrlich reinforced the defeatism, saying that in a few years “further efforts will be futile” and “you may as well look after yourself and your friends and enjoy what little time you have left.” Because they saw the situation as hopeless, the Ehrlichs supported a proposal to cut off aid to countries such as India that were seen as not doing enough to limit population growth.This book went on to be a hit in the 1970s. The population alarm it amplified eventually led to the Indira Gandhi government’s draconic sterilisation programmes and China’s one-child policy. Though Ehrlich’s alarmist prediction was falsified, the fear-mongering continues to resonate even today in our policy discourse. Today’s Ehrlichians argue, without batting an eyelid, that states having relatively higher population growth rates should be penalised financially and electorally. Financially, by making the Finance Commission transfers contingent on their population growth rates, just like Ehrlich argued for cutting off aid to India. And electorally, by stalling delimitation of constituencies. Now, there are perfectly good reasons for making Finance Commission grants contingent on the states’ governance record. Similarly, there is a debate to be held whether another round of electoral delimitation might be of any use when our parliamentarians are shackled by the anti-defection law. And yet, it’s the Ehrlichian argument that often gets deployed. At a philosophical level, by making “We, the people” itself a problem, it provides the Indian state with a ready excuse for its underperformance. At a factual level, it ignores that India’s population growth rates across states are on a decline. All states are at different points of the same journey. We should shun these Ehrlichian notions. They became irrelevant a long time ago. PS: It turns out that linking fiscal transfers to population control was also an Emergency creation. The National Population Policy of 1976, among other things, made 8% of the Union government’s assistance to state plans contingent on their performance in family planning. A Framework a Week: Public Policy SolutionismTools for thinking public policy— Pranay KotasthaneThis week, instead of a framework I have a desirable “frame of mind” for participating in Indian public policy discourse. The inspiration comes from the same essay by Jasan Crawford I quoted above. Titled Why I’m a Proud Solutionist, the essay says:“To embrace both the reality of problems and the possibility of overcoming them, we should be fundamentally neither optimists nor pessimists, but solutionists.”..The term “solutionism,” usually in the form of “technocratic solutionism,” has been used since the 1960s to mean the belief that every problem can be fixed with technology. This is wrong, and so “solutionism” has been a term of derision. But if we discard any assumptions about the form that solutions must take, we can reclaim it to mean simply the belief that problems are real, but solvable...Solutionists may seem like optimists because solutionism is fundamentally positive. It advocates vigorously advancing against problems, neither retreating nor surrendering. But it is as far from a Panglossian, “all is for the best” optimism as it is from a fatalistic, doomsday pessimism. It is a third way that avoids both complacency and defeatism, and we should wear the term with pride.”Wise words, these. Given the daunting challenges that India faces, it is easy to fall into the traps of visceral pessimism or unreal optimism. Or to end with sterile conclusions such as problems are complex, “we don’t have enough data”, or “there’s a long historical chain that explains our current problems”. Academics might deride solutionism for its attempt to solve something layered and complicated, libertarians might mistake this mindset for centralisation, and bureaucrats might hate it because some solutions go beyond incrementalism.Each of these criticisms has some merit but the public policy mindset must attempt to learn from them instead of discarding solutionism. Without this mindset, confronting tough trade-offs inherent in every policy alternative becomes impossible; every problem comes across as a wicked one. Moreover, it is easy to find PolicyWTFs — there is no shortage in the Indian context. But a solutionist frame of mind can help us reflect on policy successes instead of limiting ourselves to lampooning policy failures. Finally, a solutionist mindset makes for better stories. Given how stories are so central to human existence, it is important to give chance to the idea that even intractable problems — such as climate change — can be solved. It’s only this belief that can ward off cynicism. HomeWorkReading and listening recommendations on public policy matters[Paper] A well-written review of India’s population control policies by Gabe T Wang[Article] A Smithsonian piece by Charles Mann on the book that incited a worldwide fear of overpopulation[Article] John Lloyd in Quillete on a brand of anti-racism in the UK that’s endangering individual liberty. [Article] Andy Mukherjee writing in The Print on Asset Monetisation: What is the best asset monetisation plan? Modi govt can learn important lessons from Australia Get on the email list at publicpolicy.substack.com

14 th & 15 th

Matsyanyaaya: The Rational Actor TrapBig fish eating small fish = Foreign Policy in action— Pranay KotasthaneNothing succeeds like success. Once you are perceived as being successful, new narratives emerge that trace a neat path explaining how success was attained through grit, foresight, and determination. The role of chance fades in the background. All stories show how the hero withstood the odds, took the right decisions, and defeated a world that was stacked against it. Sometimes, nation-states craft stories with such narrative arcs. The State as the all-knowing decision-maker is imagined as a consistent, value-maximising agent, which chooses each policy as a calculated solution to a strategic problem. This model is what Graham Allison and Philip Zellikow call the rational actor model of decision-making in their classic Essence of Decision: Explaining the Cuban Missile Crisis.The book goes on to show the inadequacy of the rational actor model in explaining foreign policy decisions. It proposes two other decision-making models that take into account bureaucratic resistance, individual initiative, turf battles, and a struggle for power, to better explain government decisions. The key takeaway is that when we don’t understand the internal politics of a nation-state, we instinctively assume it as a black box that churns out decisions based on well-defined goals, well-understood alternatives, and well-projected calculations of costs and benefits of all the available alternatives. Precisely this is how the thinking about China is today on the streets and WhatsApp groups of New York, Delhi, or Lagos. Every act by China is imagined as a calculated move made with a larger long-term goal in mind; a juggernaut that makes no mistakes; an Arjuna that never misses the fish’s eye.A common way in which this narrative commonly plays out is as follows: someone will quote a Chinese leader in the past to show how prudent and far-sighted he was. Virtually, no discussion on China goes by without quotes such as “Cross the river by feeling the stones” or “The supreme art of war is to subdue the enemy without fighting” being used to conjure the image of China as a successful rational actor. So much so that some of these quotes weren’t even said by Chinese leaders and yet continue to circulate in opinion pieces, textbooks, and seminars. Take this quote attributed to Zhou Enlai for example. The story goes that he was asked by French visitors in 1972 about the impact of the French Revolution of 1789, and he sagely replied “It’s too early to say”. This is often cited to prove how the Chinese political system produces master strategists who take the long view. Turns out, he was only talking about the French student protests of 1968 which continued for many years thereafter. And yet, this story has endured.Another quote ninja is Deng Xiaoping, of course. His famous words “to get rich is glorious” is cited in support of how quickly the Chinese leadership was able to adroitly put behind the socialist excesses of the Mao era. The only problem is that it’s not known whether Deng ever said so. In fact, this phrase comes from Oliver Schell’s 1984 book by the same title on Deng era reforms. Then on, this quote has assumed a life of its own.These misattributed quotes are not mere trivia but symptomatic of a larger problem — our inability to deeply understand China. Because we don’t know what’s inside the box, we assume the Chinese system as a rational actor that succeeds because of the foresight of its leaders alone. This view, of course, is incorrect. In edition #44, I discussed four myths emanating from this line of thinking that the party-state is always efficient, always meritocratic, always a military aggressor, and always a sound strategist. To counter the China challenge, a superficial rational-actor model understanding of China is not just insufficient but harmful. It makes the adversary seem far more powerful than it is in reality. We need better models to understand our adversary. If the content in this newsletter interests you, consider taking up the Takshashila GCPP. The certificate course is customised for working professionals. Intake for the 30th cohort ends on 22nd August. Global Policy Watch: China’s Big Tech Crackdown  Bringing an Indian perspective to burning global issues- RSJWe often write here about how regulating big tech will need a different framework from the typical antitrust lens that's been used in the past to protect consumers from predatory business practices. The big tech companies pose risk to consumers not through predatory pricing or restriction of choices because of their marketshare. Instead, they abuse their market power in new and different ways. They track usage data without consent in deeply intrusive ways that should spook the average consumer. Their platforms often enable spread of disinformation and creation of echo chambers by directing consumers to content based on algorithms that optimise for engagement. Engagement is different from enlightenment. Never was this more clear in our lives as we see fake news, unscientific notions and rumours scourge our societies. Big tech poses social and political risks that are beyond the ambit of any competition laws. You cannot solve new problems with old solutions. While the west is figuring out the way ahead and making unusual executive choices, China in the past few months seems to be keen to show the world its own way of dealing with big tech. Like many regulations in the past, these are meant to reinforce the only truth in the Chinese policy sphere - the party is the boss. It can do and will do as it pleases. You may call it antitrust regulations with Chinese characteristics. This op-ed in the Chinese state run daily the Global Times gives a view on the line of thinking:“More importantly, the government will not allow internet giants to become rules-makers of data collection and usage. The standards must be in the hands of the government to ensure that giant companies are restrained when they collect personal data and stick to the principle of minimization. No internet giant is allowed to become a super data base that has more personal data about the Chinese people than the country does, not to mention using the data at its own will.For companies like Didi which have gotten listed in the US market and whose largest and second-largest shareholders are foreign companies, China should more strictly supervise their information security to protect both personal data security and national security.”I will let the irony of the Chinese state talking about privacy and on the principle of minimization when it comes to personal data of its citizens wash over all of us for a bit. Over the years there was a ‘nudge and wink’ approach between Chinese regulators and its domestic digital champions on many vexing regulatory issues. None more than the variable interest entity arrangement to list overseas that was a well established way to circumvent Chinese laws. All that is history now. The Story So FarAnyway, a quick recap of the steps China has taken in the past year or so will be helpful to set the context here.In Sep 2020, China issued a new set of rules for regulating financial holding companies with a view to regulate the enormous clout and reach of the shadow banking sector that could threaten the stability of the financial system if left unchecked. On cue, in October 2020, the Financial Stability and Development Committee headed by the Vice Premier raised concerns about the growth of fintechs and their microlending practices. In Nov 2020, Chinese regulators suspended the much anticipated $34 billion IPO of the Ant Financial Group. A record fine and the ‘disappearance’ of its founder, Jack Ma, followed.In the first quarter of 2021, Meituan (the Amazon of services in China) was fined by multiple municipal regulators and it shut down its health insurance service after facing regulatory scrutiny. Its founder, Wang Xing, a classical literature enthusiast, posted a few verses from an ancient Chinese poem about an arrogant emperor and his misguided attempts at stifling dissent. He later deleted the post. I’m not sure if there is an ancient Chinese parable about a dog with its tail between its legs that he knew.Last week, ByteDance (the owner of TikTok) postponed its US listing plans after meeting the Chinese cyberspace regulators. The official line was that ByteDance will take some more time to comply with the new regulations proposed by the Cyber Security Review Office (CSRO).ByteDance didn’t have much of a choice really. Didi, the world’s largest ride-hailing firm with about 500 million users across 15 countries, went public with $4 billion IPO on NYSE on June 30. This despite some public reservations from the CSRO on its data security practices. Didi thought it was still the old world and ignored it. The stock soared on debut and Didi’s valuation rose to $80 billion within a day. Two days later the Chinese state cracked down. It barred it from adding any new users. A few days later it found serious violations in the collection and usage of personal information of its users and ordered all app stores to remove Didi’s main app and its 25 linked apps. By the end of the last week, the cyber security regulator had announced probe into two other US listed Chinese companies - Full Track Alliance and Kanzhun. In the same week, the cyber security regulations were tightened, the overseas listings process was made tougher and variable interest entity arrangement loophole plugged. The world for Chinese digital companies had changed in a matter of weeks.There are two things that interest me in this sequence of events. What’s driving this big tech crackdown in China? And what does it mean for the world and India? I will put my initial thoughts here and I will welcome views from readers with greater knowledge of the subject.This Far And No FurtherThere are two lens to use on the reasons for the crackdown.DomesticThe CPC (Communist Party of China) created the ‘walled’ digital ecosystem that didn’t permit US tech giants to enter China. This led to the emergence of the home-grown champions across sectors that copied business models from the Silicon Valley and supplanted them in China. Over the years these champions built large businesses, innovated on the back of strong technology capabilities and laissez-faire regulations on privacy and data usage and expanded to foreign markets to create virtual monopolies in China. This has meant multi-billion dollar valuations and enormous rise in personal wealth of founders and the management teams. The CPC is now sending out a reminder to these firms on who enabled their rise. This is driven by three fears. One, the growing wealth inequality in the society because of these firms and the sense of anger at their long and tough working environments (9-9-6 is fetishised among them). Two, the CPC is worried about the enormous power and clout these founders wield which left uncontrolled can be a potential risk in future. Three, the rise of unchecked lending through fintech apps and the almost total control of the consumers’ information and choices by these digital monopolies can create rival power centres for the CPC. The CPC which had deliberately enabled a loose regulatory ecosystem to facilitate growth of their big tech companies is reining them back now. All the big tech monopoly issues that the US is wrestling with apply to China too. But with the added flavour of a paranoid state apparatus. The state is now wresting control back. And it has a convenient ideological big stick for beating them with. Big tech is threatening one of CPC’s core objectives - building a harmonious society. Expect more of this.US-China RelationsThe Biden administration has repeatedly made the point that America is in competition with China to win the 21st century. And this competition is going to be technology led. In June, President Biden signed an executive order banning investments in 59 Chinese companies that included some of the largest Chinese digital apps and telecom equipment manufacturers. On June 22, the US Senate passed Accelerating Holding Foreign Companies Accountable Act. This Act prohibits foreign companies from listing their securities on any of the U.S. exchanges if the company has failed to comply with the Public Company Accounting Oversight Board’s (PCAOB) audits for two years in a row. Currently, China’s regulators do not allow the PCAOB to inspect audits of companies registered in China and Hong Kong. This act is meant for getting Chinese companies to fall in line. Simply put, US regulators do not want American investors money to go into Chinese companies whose books they cannot audit. Chinese regulators, on the other hand, are wary of US government agencies seeking access to their homegrown champions who have enormous information about their Chinese customer base. The US regulators have given a timeline for Chinese companies to comply or delist. China went a step further. It asked existing Chinese companies with overseas listing to first undergo a thorough cyber security review with them before complying to any US regulations. This is classic one-upmanshipI wouldn’t go as far as saying this is the start of a decoupling phase between the financial markets of US and China. But the signs are ominous. China wants the domestic companies to go for a Hong Kong listing. This allows them to access foreign capital on their own terms. Plus, it keeps the wheel of finance moving in Hong Kong after the fears of it losing its status as a global financial hub in light of China’s actions there in the past year. China doesn’t want US to dictate terms to it. The recent actions suggest it won’t back down from setting the agenda. US also will not have any more of China using its state capacity to build global companies who then snoop for it. This is a deadlock. What Does This Mean?So, what are the implications of these actions? It is a bit early to arrive at any definite conclusions. But if one were to extrapolate and speculate a bit, I will draw a few conclusions.Firstly, this is trade war by another name. This mutual suspicion of intents, the charade of cyber reviews of its companies by China, the further banning of the apps by the Biden administration and the ‘new cold war’ kind of language suggests we could be in for more tit-for-tat responses between the two countries. There will be slowing down of flow of capital between them and it will have an impact on global capital markets and trade flows. Secondly, China’s clampdown on its big tech will provide ammunition to those who want to regulate big tech elsewhere in the world in a more direct way. China might not be the best model to emulate on regulations. Agreed. But the other way to frame this is - if the Chinese state is now being paranoid about the power of its big tech, how badly do we need big tech regulations in a democracy?Thirdly, there will be a slowdown in investments going into Chinese startup and digital ecosystem. Investors don’t like unpredictability and the last year has shown Chinese state can be whimsical in stopping IPOs, slapping fines, changing regulations and clamping down on companies that have huge foreign investments riding on them. This isn’t music for global investors. Expect India and other ‘open’ digital markets to rake in foreign direct investments in their startup ecosystems. Some of this is already seen in India in terms of deal flow in the past two quarters. More will follow. Lastly, there has been a clamour in India for us to emulate the ‘Chinese model’ of creating domestic champions by restricting US big tech companies to build their base in India. There’s a spectre of ‘digital colonialism’ that’s often raised by the sundry ‘Aatmanirbhar’ advocates, the local startup founders (though they are funded by foreign capital themselves), domestic VCs and others with interests in keeping global competition away. They would would like nothing better than to have a digital ‘Bombay Plan’ for the 21st century. The crackdown by the Chinese state on its homegrown companies is a useful reminder to all. The state is nobody’s friend. The state has only one interest. To perpetuate its hegemony. Once you invite it to distort the playing field, it settles down there. Now it wants to play. And that helps no one. India Policy Watch: The North vs South Debate RevisitedInsights on burning policy issues in India- Pranay KotasthaneRamachandra Guha, in an important article for The Telegraph, expresses disappointment that South India counts for too little in national politics, a situation he feels will only worsen in the future:“..for all its social and economic progress in recent decades, in political terms the South continues to count for far too little in the life of the Republic. And it may soon count for even less. On the anvil is a proposal to re-allocate Lok Sabha seats afresh on the basis of population. Were that to happen, the states that serve their citizens moderately well, such as Kerala and Tamil Nadu, will find their negligible influence on the Union government’s policies and priorities declining even further. The states that serve their citizens indifferently or abominably, such as Uttar Pradesh and Bihar, will find their already considerable influence on the Union government’s policies and priorities escalating even more. This increasing asymmetry shall place fresh burdens and stresses on the already-fragile state of Indian federalism.” [The Telegraph, 19th June]This argument adds weight to the common refrain in India’s federal polity and hence I will follow it through. Specifically, I seek answers to these two questions: what does it mean when people say that the South ‘counts too little for national politics’? And if that’s the case, what would giving the South its due look like? A caveat before we begin this exploration. South and North are completely malleable concepts. Sitting here in Southern India, North is assumed as a short-hand for the economically laggard states in the Indo-Gangetic plain. This conception generally ignores the more prosperous northern states (J&K, Punjab, Haryana, Gujarat, and Maharashtra) or the less populous hilly ones (HP and Uttarakhand). Essentially, the definition of the ‘North’ gets moulded only to focus on the basket cases. Now, back to the two questions. In my view, there are three dimensions of this detachment.1. Economic SiphoningThe perception: A common grouse you would have come across often is how the South ‘subsidises’ the North; how the money produced by the sweat and tears of factory workers on the outskirts of Chennai is wasted on farm loan waivers in Lucknow. The reality: For one, the figures that the South subsidises the North are quite exaggerated. For example, looking at direct tax data shows that Maharashtra alone accounts for 38 percent of collections. Surely, it’s not true that 38 percent of India’s economic activity takes place in Mumbai. In reality, this striking difference is because of a tax accounting design bug — since most companies are headquartered in Mumbai, taxes paid by them get “collected” in Maharashtra even if the economic activity is carried out by their subsidiaries in another state. That apart, given the shifting economic base since economic liberalisation, it is safe to assume that there is, indeed, some redistribution from the South to the North. More accurately, there is transfer of money from all states that do economically well to states that don’t i.e. even Punjab, Haryana, and Gujarat, apart from most states in the South, would be having net outward flows of government revenue. And this is unavoidable to some extent. The logic is simple — in order to ensure that at least minimum levels of key public services are achieved across the country, the poorer states would need more help from the Union government than the richer ones. Imagine another communicable disease that has been eradicated in a few rich states but not in the poor ones due to lack of funds. Sure enough, this disease will eventually spread to the richer states as well due to inter-state human movement.So, some form of redistribution across states is desirable. This is not a problem per se — no federal system in the world balances government money flow at state borders. Perhaps what makes the problem acute in India is that the stark difference in per capita GDP — the richest, Haryana, has a per capita GDP that is nearly five times that of the poorest, Bihar. More on this issue in this twitter thread.A solution: Given that there are good reasons for why government transfers exist, is there a way out? Indeed, there is. As I have written earlier, focusing on how much money gets transferred from TN to UP is a wrong question to ask. Instead, the focus should be on the government revenue that the union government appropriates from all states as a whole. If the Union is pressured to devolve more money to states via the Finance Commission formula, all states will gain. More on this “monkey and two cats” devolution fable in edition #131.2. Denial of Political PowerThe argument: the South has better socioeconomic indicators and yet its influence on Union government policies will continue to decline because of its lower population growth.The counter-arguments: The Malthusian idea that there should be a political reward for reduction of population is quite unfair to the average Indian, regardless of where she lives. That’s because in a representative democracy, the key factor that’s equated as far as possible is that my vote has the same electoral value as yours. This core principle means that constituencies across India roughly have the same number of voters. What follows from this ‘republican’ principle is that larger and denser states will definitely have more representatives than the smaller and less-dense ones. To overturn this idea because governance in the North is terrible is to punish the individuals in that state twice. This is also a defeatist argument. It assumes that the South is destined to play a shrinking role in the Union government. The solution: The problem on the political front is not with respect to MP, Rajasthan, or Chattisgarh. The real issue is that some of our worst-governed states — UP and Bihar — are also the largest single political entities. They together account for nearly 22 percent of the Lok Sabha seats, making them wield disproportionate influence at the national stage. Splitting a big state such as UP into more manageable parts would negate the advantage it has. Second, if the South wants to influence the Union government more than it currently does, regional parties from the South must work towards extending their presence in the North. Without broad basing their presence across the country, they will have to play a second-fiddle role at the national level. Regional parties need to think beyond the limited notion of one-state, one-language. 3. Cultural UnderrepresentationThe argument: Hindi, Hindu, Hindustan themes crowd out the alternate conceptions about India. I sympathise with this argument. The solution: These concerns get heightened when a Union government insists on ramming down one religion, and one language across the length and breadth of the country. Letting go of this need to assimilate might at least partially assuage the South. On the other hand, state governments should work with each other such that Kannada can be taught in Ahmedabad schools and Telugu in Lucknow colleges. In essence, solutions to the disgruntlements in India’s federal polity require imaginative solutions by both the Union and all States together. Addendum- RSJI agree with Pranay’s counterarguments on the North-South debate. Unfortunately, these are coming up with increasing frequency in the media mostly driven by the contrasting electoral fortunes of BJP in these regions. I will add a few points that are relevant to this topic.Firstly, spatial imbalance is an economic feature at every geographical level. It depends on the level of granularity at which you want to do your analysis. So, you could argue South does better than North at pan India level. But within South, maybe the old Mysore belt is better off than northeast Karnataka (the erstwhile Hyderabad-Karnataka). Within the old Mysore region, the western part has better socioeconomic indicators than the north. You can go down to the ward or taluka level of a city or a district with this analysis and you will find spatial imbalances. The reason for this is simple. Economic growth tends to spatially cluster because agglomeration of activities increases efficiency and leads to positive externalities. This sets off a virtuous cycle of more investments in social and physical infrastructure which further attracts investments and so on. This agglomeration has been exacerbated in the knowledge intensive and service industries where even migration of labour that helps in redistribution of wealth through repatriation doesn’t happen as much because of the specialised skills needed. So, this idea of using a geographic lens to assess socioeconomic prosperity and then to link it to greater political representation is illogical. You will set off a demand for such unequal representation down to every ward and taluka in the country. It is dangerous to further this line of argument in a democratic republic. Secondly, the question really is that of ‘convergence’ of socioeconomic progress between regions and reduction of spatial imbalances. This is a vexing issue for policy makers. The traditional way of looking at this is how to balance efficiency and equity within a region or a country. Continuing to have economic growth clustered in specific regions gives you efficiency but leads to regional inequities. On the other hand, we have seen top-down attempts to push investments into newer regions rarely work because of variety of factors including network effects and lack of positive externalities. In fact, forcing investments into newer regions through tax incentives or any other means leads to suboptimal results at an aggregate level. The traditional economic clusters lose out on efficiency while the newer regions rarely take off. You get neither efficiency nor equity. This is why like Pranay suggests the solution lies in greater devolution of finances and decision making in our federal structure. The choice or the trade-off is easier to make at a smaller regional unit. Of course, at the national level, the Union must make the investments in developing stronger institutions, spending on public goods and building social infrastructure to improve human development indicators in poorer regions. The answer is obviously not having differential political representation for the better off regions. Like Pranay writes that would be penalising the citizens of poorer states twice over. And if I might add it would be plain stupid. HomeWorkReading and listening recommendations on public policy matters[Article] “The China Discount Widens” writes Robert Armstrong in the Financial Times[Paper] “Amazon’s Antitrust Paradox”, the famous 2017 paper by Lina Khan in the Yale Law Journal. President Biden nominated the 32 year-old Lina Khan as the Chair of the Federal Trade Commission (FTC), the US antitrust watchdog. [Book] The Paradox of India’s North–South Divide: Lessons from the States and Regions by Samuel Paul and Kala Sridhar, is an excellent economic exposition of some key differences. Get on the email list at publicpolicy.substack.com

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While excellent newsletters on specific themes within public policy already exist, this thought letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways.Audio narration by Ad-Auris.  India Policy Watch: Road Ahead  Insights on burning policy issues in India- RSJWhat’s next for the Indian economy? Here’s a quick 8-point view on where things are at today.Clearly, the speed of vaccination will be the single biggest driver of how quickly the economy recovers this year. The daily vaccine rate has inched up to over 3 million a day after a poor May. While this isn’t adequate, there’s greater intent in procuring and debottlenecking the vaccine delivery process that’s evident. India has only vaccinated about 50 million with both the doses as we write this. It will need tremendous effort to get this number to over 600 million before December but it looks in the realm of possibility. That number will get us close to herd immunity. There’s a skew in vaccinations rates with the top 20 cities getting disproportionate supply of them. Considering these are economic hubs and drivers of consumption, this is acceptable for some time. But this skew has to reduce and the vaccines must reach the rest of India soon to reduce the probability of a third wave. There’s a danger of lapsing into complacency on speed of vaccination seeing the reduction in cases and resumption of economic activities in the big cities. We cannot afford it. The rural economy has taken a hit in the second wave going by the case count and deaths. The rural demand had held up during Wave 1 last year but it was already tapering before the start of Wave 2. The high auto-debit bounce rate data emerging from NPCI suggest greater stress in the SME sector in this wave than the previous one. The consumer sentiment surveys show the perception about current state of the economy and about the future are worse today than during the first wave. Considering the sentiment will remain muted till September when most of urban consumers would be vaccinated, this suggests we will need a magical H2 for the overall consumption to be better than FY 21. That’s unlikely to happen. IMD has predicted a normal monsoon in 2021 which is a positive though the correlation between monsoon, agriculture production and inflation has grown weaker over the years. On the balance, the real GDP for FY 22 will struggle to be at the pre-pandemic levels of FY 20. I think we will come below it. That’s two years lost because of the virus. The human impact of this loss is not widely understood or appreciated yet. On the other hand, the headline inflation might grow (CAGR) at about 6 per cent during the same two year period. This is stagflation territory. The usual problems that have plagued the economy over the last “lost decade” will continue if there isn’t serious problem solving skills brought to the table by the economic team of this government. The banking (esp PSU banks) and the financial services ecosystem will remain in stress following the pandemic. The unwillingness to lend despite huge liquidity in the system will persist. And the sectors that have been under chronic stress like infrastructure, power, telecom and SMEs will continue the same way. Barring few announcements and repackaging of old ideas, there’s no real plan that’s emerged for these issues. Instead there’s hope and optimism of some kind of magical robust recovery of the economy that’s served as a solution. Hope cannot be the strategy. The big difference in FY 22 will be the robust recovery and growth that will be seen in OECD economies. This bodes well for Indian exports. The Wuhan Lab virus origination theory and the more direct approach of Biden administration in competing with China on technology and science (US Innovation and Competition Act that was brought in this week) will make the ‘China plus 1’ model more mainstream for many companies who use it as their manufacturing base. India will have to double down on PLI schemes, ease of doing investment initiatives and woo these companies with intent. This will require bringing policy reforms, reducing state control, deft diplomacy and avoiding dysfunctional political moves that seems to have become the calling card of this government in its second term. The biggest issue that should worry the government on both economic and political fronts is jobs. Youth (15-24 age group) unemployment has gone from about 17 per cent in FY17 to over 40 per cent in FY 21 according to CMIE. The trolls can shoot the messenger (CMIE) calling it a private company. But CMIE has a track record for providing unbiased data over the years. It is easy to call it names now when the data looks inconvenient. But it won’t help India. It is important to look at the trends and think of policy actions rather than burying our collective heads in sand and listening only to the vacuous paeans of friendly trolls. The real picture isn’t pretty. The service sector jobs have been impacted because of the multiple lockdowns. About 80 per cent of service sector jobs that were lost in Wave 1 were regained by Feb 2021. That meant a 20 per cent permanent loss of jobs in the sector. But, more importantly, the corresponding percentage of jobs regained in manufacturing (excluding construction) was only 45 per cent. The cost cutting initiatives the industry did during Wave 1 have become permanent. This was evident in the FY 21 earnings growth of the listed companies that came in around 25 per cent (y-o-y). So, while the service sector has struggled to create jobs, the manufacturing has shed flab and is in no mood to bring it back. This has meant a reverse migration of labour to agriculture from industry. This is upending the gains made over the last two decades in moving labour out of farming. The K-shaped recovery was clear after Wave 1. It will turn more pronounced after this wave. This is clear from multiple data points - earnings growth of BSE 100 or NSE 50 companies that’s driving the stock markets to record highs, the GST monthly collections data that suggests more formalisation of the economy but, possibly, hides the decimation of the informal sector. The wage bill for large companies grew by over 5 per cent in FY 21 in contrast to the almost 10 per cent contraction seen among MSMEs. The high liquidity in the system has allowed the large companies to deleverage over the past five years without any growth in capital investment despite the hollow public commitments made by industry captains. The economy has taken a sharp oligopolistic turn over the last two years across the sectors. Considering the higher health and economic impact in rural areas in this Wave, there will only be exacerbation of the K-shaped recovery this time. This will have political and social repercussions too in future. The current account balance is at a surplus of over USD 25 bn driven by weak domestic consumption last year and FDI and FPI inflows into Indian equity markets and a select set of companies. Contrary to the celebratory tweets of the partisans, a surplus current account isn’t necessarily good news for this stage of Indian economy. The Indian forex reserves are also at their record high at over USD 600 bn (add another USD 75-80 bn of outstanding forward dollar purchases). FY 22 will not see any significant change in these. The current account balance will see net inflows given the outlook on domestic consumption. This gives RBI significant opportunity to keep interest rates low (real interest rates are in negative zone already), take measures to spur growth and monetise deficit without the risk of currency instability. This window must be used by the government.In summary, there are three policy moves to make - a) address the old, chronic twin balance sheet issue (multiple recommendations already in the policy sphere). Else it will get worse after Wave 2 and continue to be a drag; b) continued focus on exports and Make in India measures to take advantage of the recovery in OECD and possible isolation of China; c) Start the capex cycle, spend on healthcare and spur consumption through direct transfers in H2 FY 22 when sentiments will be better. The current account surplus and record forex reserves give us a window to do targeted spending to revive demand. This isn’t the time for austerity and tightening of the belts. Spend. Then spend some more. Else, stagflation will be a reality. Matsyanyaaya: Aussie Rules DiplomacyBig fish eating small fish = Foreign Policy in action— Pranay KotasthaneDiscussions on India’s diplomacy often hit a wall called ‘lack of capacity’. The conversation-ender is often the small size of India’s diplomatic corps. To take this conversation over the wall, I’ve been on the lookout for diplomatic institutions that can serve as reference points for India in terms of getting more done with less resources. And Australia fits the bill. Despite a small corps — just 833 Australian staff serving overseas — Australia’s diplomatic outreach has several innovations to its name. I will discuss three recent ones here.Paradiplomacy. Australia gets around its low diplomatic corps strength (to some extent) by allowing its states to have their own trade and investment offices in other countries. In Bengaluru alone for example, at least two states — Victoria and Queensland — have trade offices while the Australian consulate for southern India is located in Chennai. Victoria has a total of 23 such offices in important cities across the globe, New South Wales has 11, and Queensland has 16.I couldn’t locate any recent papers that evaluate the successes and failures of the Australian Paradiplomacy model but this is one area where Australian experiences can be of help to India. Instead of waiting for the Union government’s diplomatic intake to rise, let states take a lead on the trade and investment fronts.An India Economic Strategy to 2035. It’s somewhat amusing that the Australian government has an India Economic Strategy to 2035 document even though India itself doesn’t have an official economic strategy that looks 15 years ahead. Be that as it may, this document is far-sighted. It begins by saying that ‘There's no single major market out to 2035 with more growth opportunities for Australian business than India.’ Apart from identifying key sectors, it also identifies ten priority states in India where Australia should focus leading up to 2035. Under resource constraints, prioritise. This is another lesson worth emulating.Focusing on forward-looking global themes. I found out only a couple of weeks ago that Australia has ambassadorships and strategies for Cyber Affairs and Critical Technology, and Gender Equality. Its International Cyber and Critical Technology Engagement Strategy is an interesting document listing out Australia’s vision, goals, and values in the realm of high tech geopolitics. Having ambassadors focusing on horizontal global themes along with the traditional geographic verticals is another innovation that’s worth thinking about.In short, a small diplomatic corps cannot be used as an evergreen excuse for India’s underdeveloped global outreach. As Australia’s example shows, there is scope to do more with less.PolicyWTF (revisited): China’s demographic flip-flopsThis section looks at egregious public policies. Policies that make you go: WTF, Did that really happen? — Pranay KotasthaneOn May 31st, the Politburo of the Communist Party of China decreed that parents can now have three kids. Too little, too late.In edition #4, I had discussed how China’s one-child policy had accelerated the decline in fertility rates. Changing the upper limit to two in 2016 and to three in 2021 is the closest that an authoritarian regime can come to accepting failure. This is of course quite relevant for India since population, for many, is the root cause of all that’s wrong here. Even if it were a problem, the society has solved it on its own. From a fertility rate of 5.9 in 1960, it has come down to near replacement level — 2.2 in 2018. In any case, India’s problem is undergovernance and not overpopulation, as my colleague Nitin Pai has written before. We have written about this in our edition #49 here. To all those who still curse India’s population, learn from China’s policyWTF.To know more about China’s one-child policy, tune in to our Dec 2019 All Things Policy episode.India Policy Watch: The Fable of the Monkey and the two Cats Insights on burning policy issues in India- Pranay KotasthaneLast week saw an ugly spat between the finance ministers of Tamil Nadu and Goa on the sidelines of a GST meeting. Partisans from both sides predictably quarrelled and moved on. Nevertheless, this kerfuffle is useful for making an important point that often gets missed. The central issue is that the states’ focus on horizontal devolution is misplaced. Horizontal devolution refers to the formula used for sharing resources between states. All federalism debates almost exclusively focus on just this one issue. It also gets inaccurately framed as a ‘north vs south’ debate — how the taxes collected from the south are frittered away in the northern wastelands. But the problem really lies in vertical devolution i.e. how the tax resources are split between the Union government and all states as a whole. If the Union government keeps less money to itself, all states stand to gain together. People do not raise this issue because they falsely believe that the Union government increased the devolution substantially from 32 percent to 42 percent following the 14th Finance Commission recommendations. As the 14th FC covered the requirements of both plan and non-plan expenditure, in reality, the increase was from 39 per cent to 42 per cent. Even this modest 3 per cent increase was sabotaged by the Union government by increasing cess and surcharges, which are not shared with states. That’s why I say that India’s fiscal federalism resembles the monkey and the two cats fable. While states fight amongst each other, the Union government is happy appropriating 59 percent of the divisible pool resources, raising new cesses, and using a part of these funds to run centrally sponsored schemes that fall squarely in the states’ constitutional domain. I will raise a toast to federalism when I see at least a few states cooperating to addressing this imbalance in the vertical devolution. Until then, Union governments will be happy to play one state against the other.HomeWorkReading and listening recommendations on public policy matters[Article] Sajjid Chinoy’s two-part series in Business Standard on the economic impact of the second wave [Video] Prof Ananth Narayan in conversation with Mitali Mukherjee for The Wire on the way ahead for the economy.[Article] A cruel reminder of Goodhart’s law. To meet the 50,000 per day COVID-19 testing target for the Kumbh Mela, private labs forged the results. Get on the email list at publicpolicy.substack.com

Threat to Federalism: 1)Systematic 2)Non Systematic · Economic · political Discretionary Grants: Article 282 empowers both the Centre and the states to make any grants for any public purpose, even if it is not within their respective legislative competence. Under this provision, the Centre makes grants to the states. Statutory grants: under Article 275 (both general and specific) are given to the states on the recommendation of the Finance Commission. In post-independent India, the Centre, on several occasions, has used its powers to dismiss or use the Governor to intimidate democratically elected governments. During the Emergency, education was moved to the Concurrent list which was until then a State subject under the constitutional division of responsibilities. However, the adverse changes to federal relations at present are more systemic. To understand what has changed, at the risk of repetition, there has been increasing centralisation in resource allocations and welfare interventions. The gap between the revenue that State governments are allowed to generate and the expenditure that they are expected to incur has been widening, particularly with the implementation of Goods and Services Tax (GST). The shortfall of GST this year and the Centre's lackadaisical response to demands for compensation by State governments are again known. We can also see the consolidation and expansion of a few big business groups seen to be close to the BJP, probably at the expense of smaller players. On the one hand, the Centre has sought to insulate Indian big business from global competition by choosing not to enter into the Regional Comprehensive Economic Partnership (RCEP), but has eroded the power of small businesses through support for GST and the call for a single national market. Clearly, bigger players are more likely to benefit from a removal of State-level barriers to trade at the expense of smaller regional players. This re-calibration of State-capital relations works against smaller entrepreneurs and entrepreneurship. Institutional transgression The second challenge is in the use of executive and legislative aggression. Central institutions are increasingly weakening the policy levers of State institutions. Institutions such as the Income Tax Department, the Enforcement Directorate and the National Investigation Agency are being used to intimidate opponents. Appointments are not untouched either. For instance, the Centre has been meddling with the appointments of vice-chancellors in universities funded and run by State governments. Direct transfers to beneficiaries of welfare schemes bypassing States are also contributing to this dynamic. Further, as recent events suggest, the Centre is increasingly ignoring elected representatives of State governments, holding meetings with State secretaries and district collectors on issues that are primarily under State control. An example was a recent meeting by Minister of Education Ramesh Pokhriyal Nishank with State Education Secretaries on implementation of the New Education Policy. Source: The Hindu and Laxmikant --- This episode is sponsored by · Anchor: The easiest way to make a podcast. https://anchor.fm/app

This newsletter is really a public policy thought-letter. While excellent newsletters on specific themes within public policy already exist, this thought-letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. It seeks to answer just one question: how do I think about a particular public policy problem/solution?PS: If you enjoy listening instead of reading, we have this edition available as an audio narration on all podcasting platforms courtesy the good folks at Ad-Auris.Not(PolicyWTF): Acknowledging State FailuresThis section looks at egregious public policies. Policies that make you go: WTF, Did that really happen?- RSJWe rarely miss an opportunity when the political or the administrative class make an announcement or draft a policy that goes against our ideology of common sense. So, it is only fair we write about the rare occasion when someone gets things right. Even if it is only in a speech. Something New This was that week. Here’s our PM speaking in the Rajya Sabha about the state spreading itself too thin and the unfortunate demonisation of the private sector in our polity. The Print reports:While doffing his hat to the private sector Wednesday for its contribution to the growth and development of the country, Modi questioned the “power centre we have created in the country by handing over everything to babus”. “Sab kuch babu hi karenge. IAS ban gaye matlab woh fertiliser ka kaarkhana bhi chalayega, chemical ka kaarkhana bhi chalayega, IAS ho gaya toh woh hawai jahaz bhi chalayega. Yeh kaunsi badi taakat bana kar rakh di hai humne? Babuon ke haath mein desh de karke hum kya karne waale hain? Humare babu bhi toh desh ke hain, toh desh ka naujawan bhi toh desh ka hai,” Modi said.(Babus will do everything. By dint of becoming IAS officers, they’ll operate fertiliser warehouses and also chemical warehouses, even fly aeroplanes. What is this big power we have created? What are we going to achieve by handing the reins of the nation to babus. Our babus are also citizens, and so are the youth of India.)  I don’t know when words of this nature were last spoken in the Parliament. Maybe Minoo Masani made a few speeches of this kind during the heyday of the Swatantra Party. But to have a hugely popular PM, one with the rare ability to make the public do his bidding, speak these words suggests a shift in direction that was long-awaited. Anyway, that speech came on the back of weeks of protests against farm laws that had morphed into Ambani-Adani bashing. The names don’t matter. A few decades back it was Tata-Birla. We have also had the usual reports about how the pandemic has exacerbated inequality purely on the basis of notional wealth created by a rising stock market. And there have been bizarre articles devoid of any economic logic as well. These are familiar grounds. We have framed it as growth or redistribution trade-off in a few of our past editions. Like many others, we have argued India needs growth before worrying about redistribution. We have also done our best to dispel a notion deep within our psyche. That we are in some kind of a giant zero-sum game and someone winning must mean someone is losing. Is that it? Or is there more that can be brought into this debate?The state must aim to foster conditions in a society that advance the well being and prosperity of its members. No one argues with this goal. The fundamental question of public policy then is what are the means it must adopt to create this environment? Should the state aim for equality among its member through redistribution of its resources? That there can be no harmony or stability in a society unless there’s fairness and equality among its members.Or, should the state guarantee the fundamental rights of the citizens, provide for law and order that safeguards them against anarchy and then get out of their way. People don’t want the state to legislate for some notion of equality that’s in its mind. They want freedom and security. That would do. Thank you very much. The old Rawls versus Nozick debate Rawls’ seminal A Theory of Justice argued for justice as fairness (the title of a later book of his) with two key principles. First, the greatest equal liberty principle which proposed people’s equal basic liberties should be maximised. Rawls conceived of an artificial construct called the original position - a state where each one of us has to decide on the principles of justice behind a veil of ignorance. That is we are blind to any fact about ourselves; we are ignorant of our social position, wealth, class or any natural attribute. Behind this veil, Rawls asked how would we choose the principles of justice for the society? For Rawls, the logical choice for all of us would be what he called the maximin strategy that would maximise the conditions of those with the minimum. This gave him his second principle - the social and economic inequalities should be arranged only to provide the greatest benefits to the least advantaged. Nozick agreed on the liberty principle with Rawls. But he had a strong disagreement on the idea of maximin. For him, any distribution of wealth (or holdings as he termed it) is fair if it comes about by a just and legitimate distribution. He defined three legitimate means. First, where the acquisition of a property that is unowned is achieved through the enterprise of a person and this act doesn’t disadvantage anyone else. Second, a voluntary transfer of ownership between two consenting entities. And third, a redressal of a past injustice in acquiring or transferring the holdings. Anyone who has acquired wealth or holdings through these means is morally entitled to them. Any attempt by the state to redistribute it would be a serious intrusion on the liberty and, therefore, unjust. So the goal to reach a patterned distribution of wealth had a problem at its core. Once you achieve such a delicate balance, how do you maintain it? Every random economic act from there on will disturb the balance. And such random acts will be too many for the state to control. The state will then have to constantly meddle in the lives of its citizens to redress the balance. This meddling will spiral out of control soon till the state takes over the lives of its citizens completely in a totalitarian future. For Nozick state can act to redistribute only with the consent of its citizens. If people voluntarily redistribute their wealth (means #2) to others and want to design a society on that principle, they are free to do so. But the state cannot impose it against their will. To me, the first point of agreement between Rawls and Nozick is critical from an Indian context - the liberty principle or the basic freedoms that must be guaranteed to every citizen. These cannot be violated or the absence of such freedoms should not be tolerated even if doing so in some ways increase the aggregate prosperity of the society or help the poor. Before we argue about redistribution, we must ask if we have created a society that satisfies the greatest equal liberty principle. That must be our first goal. Postscript:I don’t remember when I lost my faith in the ability of the state to improve the lives of its people. Perhaps there wasn’t an exact moment. Growing up the state was all around me. I spent most of my childhood in what used to be called a ‘colony’. One of the many that dotted the semi-urban Indian landscape in the 80s. A small industrial township whose heart beat to the rhythm of the government-owned factory at the centre of it. My school, my playground, the hospital and even the temple were all run by the state. The state then subsidised a world-class higher education programme for me. At the turn of the millennium, I entered the workforce. If you had cut me then I would have bled state. Over the next two decades, I lost my faith. Gradually. Two factors led to it. One, I understood the privilege that allowed me to take advantage of the generosity of the state. The accident of my birth - a savarna Hindu male born in the mid-70s to educated parents - seemed to play a disproportionate role in my relative success. I noticed the state could barely enable others to do well who weren’t born to privilege like me. They didn’t have the freedom that I took for granted. The state was absent to those who needed it the most. Two, the state had tremendous confidence in its capabilities that, unfortunately, was inversely related to its actual performance. This led the state to have its finger in every pie with poor outcomes. The state cast its long shadow in everything I did. It was present everywhere.The Indian state was simultaneously ‘omnipresent’ and ‘omniabsent’ depending on who you were. One thing was common though. The consequences of both were terrible.Once I saw through the nature of the state, I couldn’t ‘unsee’ it. The sorry spectacle of the flailing state, as Pritchett called it, was all around me. I wondered how others couldn’t see it. Why despite the overwhelming evidence do we look for the state to solve problems where there was no apparent market failure? Why did the state not narrow its focus on things that really mattered and build capacity in them instead of spreading itself too thin? Whenever I read about the argument for state to get into further redistribution, I cannot help but ask how does the end result of this patterned distribution look like. Is there really any end to it? Why should we let it meddle even further into our lives trying to get the redistribution right? Why can’t the state focus on ensuring the privilege I was born with is made available to all its citizens? That would fulfil the first principle agreed upon by both Rawls and Nozick. The rest is just criminal overreach. PolicyWTF: Compulsory PhilanthropyThis section looks at egregious public policies. Policies that make you go: WTF, Did that really happen?— Pranay KotasthaneWe in India love our oxymorons. Back in college days, we had “compulsory elective” courses. Similarly, many government interventions are what my senior colleague Narayan Ramachandran calls “voluntary mandatory” — voluntary according to the law but mandatory in practice. The most common example is the requirement to submit the “voluntary mandatory” Aadhaar for accessing any government service. To this venerable tradition, add one more - “compulsory philanthropy”. Philanthropy implies choice. It is an act of generosity, of empathy. But that’s not how the State sees it. Under the name of Corporate Social Responsibility (CSR), philanthropy was made mandatory starting in 2014. That move didn’t go as well as the State desired (surprise surprise!). One, there wasn’t just enough CSR expenditure forthcoming. The highest total CSR expenditure, clocked in FY19, was just about ₹18,000 crores. For reference, the union government earned ₹20,000 crores in FY20 through the Education & Health Cess alone. Two, new frauds emerged, with some companies funding dubious CSR projects that clawed money back to their promoters (duh!). And three, and this is the most important one. Fearing the wrath of the State, many companies spent their CSR funds on the “safe” subjects such as primary education and health, precisely the areas where the State’s role is supremely important. In other words, this had the effect of allowing the State to outsource its core functions.Given these problems, the union government notified changes to the CSR rules last month (you can read the gazette notification here). These changes are all too familiar — increase disclosure requirements, mandate impact assessments, and of course, generate more accounting work. To balance it out, there are some positives too — a regimented list of subjects that qualify for acceptance of CSR has been replaced with a negative list, while the CSR provision has been decriminalised (phew, small mercies!).I will evaluate the impact of these new rules at a later point in time. For now, I want to return to the purpose of CSR and debunk three common arguments made in favour of mandating philanthropy.The first argument is that CSR is just corporate tax by another name, so why bother. I agree that once you make philanthropy mandatory and statutory — India is the only country in the world to do so — CSR becomes tax-like. And yet, it is only worse. Anyone doing business in India will attest that it’s impossible to do so without breaking one of the thousands of rules and laws that demand compliance. Now with new rules and additional compliance requirements, CSR becomes another tool in the hand of the State to corner businesses and worse still, create new corruption opportunities. There are three costs associated with any tax-like mechanism: the cost of collection, the cost of compliance, and the cost of market distortion. Mandating CSR is a tax in which the cost of compliance is way too high for it to make any economic sense. If the objective is to mobilise resources for social welfare, there’s a much better tax-like mechanism — it goes by the name ‘tax’. The second argument is that look, many great things have happened because of CSR — lakes are being maintained, schools have started functioning, and drinking water is being provided. So why not get companies to do even more?I call this argument the cost-blind fallacy. Any expenditure worth ₹18,000 crores is, of course, going to do some good things. In a complex system, even the worst of public policies always have some positive benefits. That doesn’t imply that anything goes. Since every policy also has a cost attached to it, it’s benefits need to be compared with the costs incurred. So, has anyone asked what were the explicit and implicit costs of mandating CSR? Does it make the State more complacent having outsourced its work? What are the compliance costs for companies? Does it make companies already involved in philanthropy of their choice scale back their efforts to satisfy government paperwork? Without an answer to these questions, recounting a few successful examples of CSR is poor reasoning.The third argument is that companies spending money on social welfare will be more efficient at achieving the required outcomes than our already stretched-out State. A quote from this Business Standard report gives a good idea about this line of thinking:“India has huge inequalities in society and there is much to do about our environment. It is not possible or fair for the government to tackle it alone. It would also take many, many years to see the results. The reason CSR law was brought in was to make industry an equal and responsible stakeholder in the development process.” This argument falls flat on two counts. One, development successes are not achieved by “equal” stakeholders trying to fix each other’s failures but by each stakeholder doing well at what it is supposed to do in the first place. It’s not about ‘everyone doing everything’ but about ‘everyone doing at least one thing well’.Previously, I have argued how hyper multi-objective optimisation lead to poor institutions and policies. Let the objective of the market be to bring prosperity and create livelihoods. Burdening it with social welfare conditions will lead to a situation where it achieves neither of the outcomes.Two, to think that companies can easily plug government failures is deluding ourselves. All of CSR expenditure in FY19 less than one-third of union government expenditure on MNREGS alone. It’s only the state that has the resources and stamina to provide public goods. It must be held accountable for that. No amount of philanthropy can be allowed to wash the State its hands of the results. In sum, compulsory philanthropy is akin to the Indian State reprimanding Markets and Society by saying: I won't do what I'm supposed to but why the hell aren't you two doing what I'm supposed to do?India Policy Watch: Resources for Budget AnalysisInsights on burning policy issues in India— Pranay KotasthaneThe budget season is upon us. After the union government budget, states — which account for nearly sixty per cent of all government spending in India — are in the process of planning their next financial year. I strongly believe that financial statements of governments require closer scrutiny. Without better analysis of incomes and spending, we cannot expect government accountability. Add to that, this is one activity that public policy enthusiasts can do from the comfort of their homes. So in this edition, I want to share some publicly available resources that can help you understand government finances better. Apart from state and union budget documents, there are many other data sources scattered on websites of different government bodies in true Yes Minister fashion.Hopefully, this non-exhaustive list will be of some help.PrimersIf you want to understand the basics of a government budget, start with PRS Legislative Research’s Overseeing Public Funds - How to scrutinise budgets document. The portal OpenBudgetsIndia also has a good primer here. If you want to analyse the budgets of your state, we have a three-part YouTube tutorial here: 1, 2, and 3.Public Finance DatabasesIf you want to know the stated outputs and outcomes of union government schemes, read the output outcome framework document released with the other budget outlay documents. If you want detailed information on union government spending arranged by minor heads, the Controller General of Accounts releases finance accounts data every year. The Department of Economic Affairs releases an Economic and Functional classification of the union government budget. If you’re on the lookout for the combined expenditure of union and state governments on areas such as research, health, or education, look at the Indian Public Finance Statistics.If you are looking for information on disinvestment of union government-owned public sector units, the Bombay Stock Exchange maintains a database here. The RBI maintains a database of all state government finances in one place, that too in spreadsheet form(!), here. All supplementary grants made by the union government ministries can be found here. If you know of more such documents that lie hidden in plain sight, send them to me. Let’s create an exhaustive public finance database index.Quiz: An Election Manifesto Worth Reading— Pranay KotasthaneElection manifestos are boring laundry lists of promises and a litany of woes rolled into one. So let me present to you an exception. Given below are excerpts from an election manifesto of a political party, written by a well-known Indian political leader. You need to name them. Send us your answers as comments to this post. If not, just enjoy this manifesto for its clarity and farsightedness. I’ve substituted XYZ for the name of the party in these excerpts. On principles of the party“The attitude of the Party in public affairs will be governed by the following principles: It will treat all Indians not only as being equal before the law but as being entitled to equality and will accordingly foster equality where it does not exist and uphold it where it is denied. It will regard every Indian as an end in himself with a right to his own development in his own way and the State as only a means to that end. It will sustain the right of every Indian to freedom- religious, economic and political– subject to such limitations as may arise out of the need for the protection of the interests of other Indians or the State. It will uphold the right of every Indian to equality of opportunity subject to the provision that those who have had none in the past shall have priority over those who had. It will keep the State ever aware of its obligation to make every Indian free from want and free from fear. It will insist on the maintenance of liberty, equality and fraternity and will strive for redemption from oppression and exploitation of man by man, of class by class and of nation by nation. It will stand for the Parliamentary System of Government as being the best form of Government both in the interest of public and in the interest of the individual. ….There may not be anything new in the Principles of the XYZ. They will be found in the manifestoes of most political parties. But there are two considerations which distinguish the Z from other Political Parties. The first consideration is that the principles of the Z are not adopted by the Z merely to look politically respectable or merely to delude the voters. They are natural to the Z. They are borne out of the social condition of the XY. The XYZ cannot exist without adopting these principles and without holding up to those principles and living up to them. The principles of the XYZ are the life book of the XYZ. They are not the external marks of a political faith. They are the outward register of the inward feeling. They are not cloak worne for the purpose of winning the election. Many parties may adopt these principles. But no party can be so true to the principles as the XYZ.”On what the party’s policy would be like“The policy of the Party will be to try to give effect to the principles set out above. The policy of the Party is not tied to any particular dogma or ideology such as Communism, or Socialism, Gandhism, or any other ism. The Party will be ready to adopt any plan of social and economic betterment of the people irrespective of its origin and provided it is consistent with its principles. Its outlook on life will be purely rational and modern, emperistic and not academic.”The Party’s approach to increasing productivity“For the purpose of increasing production, the XYZ will not be bound by any dogma or any pattern. The Pattern of industrial enterprise will be a matter regulated by the needs of the time and circumstances. Where national undertaking of an industry is possible and essential, the XYZ will support national undertaking. Where private enterprise is possible and national undertaking not essential, private enterprise will be allowed. Looking at the intense poverty of the people of this country no other consideration except that of greater production and still greater production can be the primary and paramount condition. A pre-conceived pattern of industry cannot be the primary or paramount consideration. The remedy against poverty is more production and not the pattern of production.”On Kashmir“On the Kashmir issue, the policy adopted by the Congress Government is not acceptable to the XYZ. This policy if continued will lead to a perpetual enmity betwen India and Pakistan, and the possibility of war between the two countries. The XYZ believes that it is essential for the good of both countries that they should be good and friendly neighbours. For this purpose the proper policy to adopt towards Pakistan should be based upon two considerations. (1) There should be no talk about the annulment of the partition of India. Partition should be accepted as a settled fact not to be reopened and that the two countries to continue as two separate sovereign States. (2) That, Kashmir to be partitioned– the Muslim area to go to Pakistan (subject to the wishes of the Kashmiries living in the Valley) and the non-Muslim area consisting of Jammu and Ladhak to come to India.” On Foreign Policy“The other centre of our foreign policy which has made other nations our enemies is China. India is made to fight her battle for entry in the United Nations Organisation as a permanent member thereof. This is an extraordinary thing. Why should India fight the battle of China when China is quite capable of fighting her own battle? This championing of the cause of Communist China by India has been responsible for the prevailing antagonism between India and America with the result that it has become impossible for India to obtain financial and technical aid from America.…. India’s first duty should be to herself. Instead of fighting to make Communist China a permanent member of the U. N. O. India should fight for getting herself recognised as the permanent member of the U. N. O. Instead of doing this, India is spending herself in fighting the battle of Mao as against Chaingkai Shek. This quixotic policy of saving the world is going to bring about the ruination of India and the sooner this suicidal foreign policy is reversed the better for India. Before championing the cause of Asiatic countries, India must strive every nerve, must seek every aid to make herself strong. Then only will her voice be effective. This will be the line of Foreign Policy that the XYZ will pursue.”Finally, cheers to a strong rejection of prohibition.“From the point of equity, there is no justification for prohibition. The cost of prohibition is borne by the general public. Why should the general public be made to pay the cost of reforming a lakh or two of habitual drunkards who could never be reformed ? Why should the general public be made to pay the cost of prohibition when the other wants of the public such as eduction, housing and health are crying for remedy? Why not use the money for development plans? Who has greater priority, the Drunkard or the Hungry? There are pertinent questions to which there is no answer except arrogance and obstinacy. Whatever happens, the policy of prohibition must be reversed and this colossal waste of public money should be put a stop to and the resources utilised for advancing general welfare.”HomeWorkReading and listening recommendations on public policy mattersThe Economist (Schools brief) on the three post-war liberals who strove to establish the meaning of freedom.[Article] Prof Govinda Rao has the authoritative take on the 15th Finance Commission recommendations.[Podcast] Pranay and Saurabh discuss GameStop, Rihanna, and the politics of radically networked societies on Puliyabaazi.[Article] Bharat Karnad has another contrarian take on Tejas and India’s search for fighter aircraft. Get on the email list at publicpolicy.substack.com

This newsletter is really a public policy thought-letter. While excellent newsletters on specific themes within public policy already exist, this thought-letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. It seeks to answer just one question: how do I think about a particular public policy problem/solution?PS: If you enjoy listening instead of reading, we have this edition available as an audio narration on all podcasting platforms courtesy the good folks at Ad-Auris. If you have any feedback, please send it to us.India Policy Watch #1: Rahne Do, RihannaInsights on burning policy issues in India- RSJIn one of the recent editions on GameStop, I wrote about the Gamma squeeze and I was particularly pleased with myself. After all, there might not be many newsletters who over the last year could have shoehorned Dr Shreeram Lagoo, Louise Glück and Gamma squeeze into their editions. Maybe there’s someone up there who is keeping an eye out for me. Because this edition has Rihanna and Mia Khalifa (careful now) in it!What a time to be alive and, importantly, to be writing on public policy!The Farm Laws BackstoryWe have written quite a bit on the new farm laws in the past few months. I believe the laws are critical to transforming agriculture in India. Pranay agreed on the potential of the laws but questioned the timing and the lack of a narrative by the government to make them acceptable to all stakeholders. He felt this could get sticky.Turns out he was prescient. A simple stakeholder mapping exercise would have revealed the key farmer groups in Punjab and Haryana would be the most impacted by these laws. They needed specific attention. Further, the years of paranoia built by the Indian state itself about corporates, profits and other capitalist bogeys in farming would not just go away by a stroke of the pen. It should have been expected that it will be used by those in opposition to create a counter-narrative. A government that encourages opinions and arguments within its cabinet and among its coalition partners would have figured a way to anticipate and resolve these issues. But the usual shock and awe playbook that this dispensation favours came into play. An announcement about the new farm laws was made at the peak of the pandemic as part of the COVID relief package. Then came the ordinance, and finally the farm bills went to parliament where they were passed with a voice vote in Rajya Sabha. That, remember, was the only place where there was a half-decent chance of a debate. It was not to be.Now you can argue that almost every party has in the past had similar laws as part of their manifesto. Or there have been umpteen committees who have recommended opening up of agriculture and dismantling of MSP. But only a political novice would believe these would mean everyone opposed to the government today would lay out the red carpet for these laws. Nothing this sensitive and transformative will be accepted in our fractured polity without building a narrative for it. But there wasn’t any strong ‘sell your story’ efforts for a set of reforms that if pitched right might have actually been supported by Greta Thunberg. After all, the groundwater depletion and other ecological imbalances in many states are because of incentives and distortions the MSP provides to grow crops alien to the land. In A No-Win SituationSo here we are. The farmer protests have gathered strength. The government has offered an eighteen-month delay in implementing them. The commitment to continue with MSP has been made. In short, the reforms are dead in water. But it has made zero difference to protests. Because while making these conciliatory moves on one hand, the government has gone into an overdrive painting the farmers as anti-nationals and terrorists. The protests now have morphed into a Shivji ki Baraat - all kinds of assorted species are in it. Then we have the unedifying spectacle of spikes being nailed and battlefield-like fortifications on roads leading up to national capital. This is to prevent the farmers from entering it. This has now gone beyond farm laws. Into this mix walked in Rihanna. On Tuesday, she tweeted out “Why aren’t we talking about this?’ with a link to a CNN article about headlined, ‘India cuts internet around New Delhi as protesting farmers clash with police’ to her 101 million followers. Soon Greta Thunberg and Mia Khalifa tweeted their support to the farmers. That’s it. The radically networked societies (RNS) of their supporters coalesced with the network of Indians who were protesting the laws. So in the red corner, we had the Radically Networked Society -1 (RNS1). The government got into the act. Soon we had Indian film stars and cricketers supporting the laws (and more). And in the blue corner, we had the RNS2. To top it, the Ministry of External Affairs (MEA) also came out with an officious sounding formal statement asking global celebrities to stay away from matters relating to India. We now have a triangular contest of sorts - the state, RNS1 and RNS2. Going DeeperThere are a few issues involved that merit discussion and conceptual clarity. Let me attempt to tackle them. Your thoughts are welcome.Like Pranay says, every issue is global by default in the times of RNS. You don’t have to be universalist to take a position on an issue that doesn’t affect you directly. Social media allows you to take a position and broadcast it to your followers. And you will. A vocal stand on issues generates cohesion among the members of your RNS. Cohesion strengthens RNS and draws more members. This is the RNS flywheel (Jeff Bezos who secretly reads us would be so proud of me for this analogy). Celebrities have taken a stand on issues unrelated to their countries for decades now. They are private citizens and they are free to do so. And there will be more of this kind of activism seen in future. The challenge for the state is, in the times of RNS, they can inflict serious damage on the objectives of the state by supporting a counter-narrative. I’m staying away from whether the objectives of the state are right or wrong for now. The state is hierarchical and it cannot be agile enough to contend with the speed of RNS mobilisation. The state has two options - continue with its slothful response or mobilise its own RNS. The Rihanna tweet followed by the tweets of the ‘state celebrities’ is the Indian state’s recognition of the power RNS, its own limitation to counter it through official means and its signal to others that it can mobilise its own RNS. Should states be doing this? Probably some action was needed as self-preservation is the primary goal of the state. RNS is a threat and they must learn and deploy counters to it. Also, this was a way to pre-empt other celebs from jumping on to the bandwagon. The rest of the narrative built about these celebrities being paid or being on the payroll of George Soros (that’s one guy with all the time and money with him to support leftist causes, around the world, apparently) is meaningless drivel. That’s just the loony supporters and the IT cell discrediting the other RNS. It is stupid and it helps mobilise the opposing RNS. The other question is how should we view Indians who encourage global celebrities, organisations or governments to take a stand on government action. Do these acts constitute support for violation of our sovereignty? Firstly, global organisations and foreign governments do take positions on acts of other governments all the time. These positions are conveyed through diplomatic channels as a matter of routine. In case this doesn’t work they use the media to make their position known. The most common of these issues are those where there is an established global order of going about things. For instance, just last month the US Treasury department put India on the list of currency manipulators. Now, is this a violation of our sovereign right to manage our currency? We live and trade in a global order. So we should abide by its rules. Else, others will act in a manner that will question our sovereign moves. On other occasions, the issue could be of the government action violating human rights or being undemocratic. This is a tricky area since it is not easy to define them. But that hasn’t stopped India to opine on others over the years or vice versa. Secondly, there’s no such thing as internal matter as the Indian state likes saying. In the RNS world, issues are global. Also, the farmers’ protests haven’t emerged out of thin air. There’s a cause and an effect. So, it serves no purpose to ask others to keep off our lawns if there’s smoke coming out of our house. Fixing the smoke is our problem, of course. But others asking us to have a look at it isn’t a violation of any sort. They are only making statements.Thirdly, and this is perhaps the most important point, private citizens of India raising their voice against certain actions of the government in domestic and international platforms is not the same as treason against the state. The state exists because the citizens have given it the legitimacy to use violence. The citizens can and should question if the state steps beyond it. There’s a line there that the citizens can’t cross where their acts, not words, can threaten the existence of the state. But that line is quite distant. It can’t be invoked on the smallest of pretences. Unfortunately, this has now turned into conspiracy theories about a deep state wanting to destabilise India or preventing its pre-destined rise to being a superpower. Superpower pre-requisite #1 is to be secure enough not to wallow in conspiracy theories against you. Read more about USSR on this. The other point I had was about the role of institutions in a democracy. Acemoglu, Johnson & Robinson have argued about the nature and the strength of institutions as the fundamental reason for the sustenance of a democracy and for its long-term economic growth. This explains why democracy has struggled to develop roots in countries like Myanmar or in many nations that won their independence following WW2. And also, why its sustains in India. All the revisionism about our history, our freedom struggle or about Gandhi, Nehru and Ambedkar won’t wear out a single unvarnished truth. The founding fathers of our Republic built institutions and served to strengthen them to sustain our fledgeling democracy. Why do I bring up the point on institutions here? Well, a question I have asked in the past week is what prompted a host of our celebrities to copy-paste the exact tweet to support the government? And did the irony of following a government diktat to the letter while taking a stand against propaganda was lost on them? Do they really believe in the benefits of the farm laws? Is this a show of patriotism? Or, are they toeing the line of the state because it is in their interest? Maybe it is the first two. But I’m sure there is an element of toeing the line here based on how coordinated the act was. And this toeing the line isn’t a new thing. Previous governments have done the same or worse. What do our celebs fear? Compare this with the stands taken by celebrities, sports personalities and many CEOs during the Trump era. The simple conclusion you reach is the US state can’t use its institutions to go after you. The police, the FBI and the tax authorities won’t find a hundred reasons to file charges. Their institutions are strong and they follow their own code. Plus, the state isn’t overbearing. Its laws don’t encompass every aspect of your life in a manner that you cannot ever claim you haven’t violated them. The question we must ask is what does the easy falling in line of celebrities or the fear of protesting against laws say about the state of our institutions and the nature of the state? And if our institutions are indeed weakening, what does it portend about the future of our democracy and our long-term growth prospects. Among the great skills of the present government is how easily it can shift any discontent against its actions into the territory where it is the strongest. Nationalism. Over the years it has also built a strong media ecosystem that advances nationalism as a primary means to reach the objectives of the state - economic prosperity and protection of sovereignty. Unfortunately, history has shown nationalism is a blunt instrument to achieve sustainable prosperity. The Khalistan flags seen during protests or Rihanna’s tweets give the government ready props to fight the battle of ideas on farm laws on the grounds of nationalism. There, even if it loses the battle, it will win the war. The question is if that holds true for India too. Addendum— Pranay KotasthaneI have three short points to add to RSJ’s comprehensive take. One, every protest should be assumed as being global by default. Gandhi’s political genius was to get the masses to participate in the freedom struggle at a low opportunity cost, by just spinning a charkha. Today, this job doesn’t require a Mahatma, it justgets done by the internet. Showing instantaneous support for any cause across the world is now almost frictionless. It can be done with low opportunity costs. Even when there’s no immediate cause, there’s work happening — latent identities get created or reinforced through social media tuned for rewarding polarisation. Come the next immediate political cause and this powder keg is ready for use. ‘Nolocus standi’ arguments are pointless.Two, those with the lowest stakes in an issue might end up being the more powerful voices. Because the entry barrier is so low, you don’t need to have much at stake to show support. Such a scenario complicates dispute resolution as those with the highest stakes can get sidelined. Even worse, the state machinery will be hard at work to establish nefarious links between those with high stakes/low power and those with low stakes/high power, with the aim to discredit both.And three, the more aggressive the State response, the more fodder it is for future RNSes. The State that responds, positions itself as the villain which brings together more people. It becomes the ‘other’ that creates the ‘us’. Once that happens, all that remains is the next political cause to emerge. India Policy Watch #2: Politics and Visual StorytellingInsights on burning policy issues in India— Pranay KotasthaneIt irks me when someone forms a strong opinion on complex issues just by watching a Netflix series, movie, or documentary. Chernobyl and The Social Dilemma come to mind. Both these rather well-made series ended up confirming biases against nuclear power and social media respectively. Visual storytelling is evocative. It can create powerful narratives that elicit instant responses from what Daniel Kahneman calls the fast brain. The more a visual story appeals to our emotions, the more the need to temper the fast brain response with reflection, education, and discussion.And yet, our movies can reveal a lot about our politics. Not through what they show but through what they cannot show. For example, would it be possible today for a mainstream movie to have a plot in which a Muslim man elopes with a Hindu woman? Or would it be possible to recreate the iconic Mahabharat parody scene from Jaane Bhi Do Yaaro today? What happened to Tandav and Munawar Faruqui indicate otherwise. This should worry us all. An insecure society abridges individual creativity and distracts the State from what it is supposed to do. It is this insecurity that paves the way for pakistanisation of a society.PS: A French Netflix parody A Very Secret Servicecame as a refreshing change. The politically incorrect and satirical take on France’s national security apparatus spares none. I couldn’t help but rue the fact that something on these lines is unimaginable in present-day India. India Policy Watch #3: The Constitution in a Knowledge GraphInsights on burning policy issues in India— Pranay KotasthaneIn #103, I had written how cool would it be to represent the Constitution as a knowledge graph. Well, one AtU reader, Rithwik, has now created one such knowledge graph and it looks stunning.This image below is the Obsidian Knowledge Graph of the Indian Constitution. The backlinks are based on cross-referenced articles in the Constitution. One immediate thing you will notice is how disconnected the Directive Principles of State Policy section is. It’s like an afterthought. Rithwik has helpfully put the code and all files on GitHub. We are now on the lookout for ideas to make the backlinking more intelligent and useful. If you have any such ideas, please do send a comment. HomeWorkReading and listening recommendations on public policy mattersThe unyielding demands of the protesters and the response of the government are both troubling, writes T.N. Ninan in the Business Standard[Report] The 15th Finance Commission report is out. It is a goldmine for people interested in Indian public finance. The studies commissioned by the Commission are equally useful. Get on the email list at publicpolicy.substack.com

We have hit a century! Thank you for reading us.This newsletter is really a public policy thought-letter. While excellent newsletters on specific themes within public policy already exist, this thought-letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. It seeks to answer just one question: how do I think about a particular public policy problem/solution?PS: If you enjoy listening instead of reading, we have this edition available as an audio narration on all podcasting platforms courtesy the good folks at Ad-Auris. PolicyWTF: Prohibition and MoralityThis section looks at egregious public policies. Policies that make you go: WTF, Did that really happen?— Pranay KotasthaneIf one were to write a book chronicling bans on victimless crimes in India, the index entry for Morarji Desai would be a long one. After all, he holds the dubious distinction of turning lakhs of ordinary citizens into criminals by prohibiting two independent victimless crimes. The first ban, on alcohol, is rather well-known. The notorious Bombay Prohibition Act of 1949 was passed when Desai was the state’s Home Minister. To enforce the ban, the government created elaborate compliance machinery, misdirecting the limited policing capacity towards apprehending tipplers instead of protecting victims of other crimes. By the time this act was watered down in 1964, more than four lakh people had been convicted under Prohibition! The draconian law is well-documented in Rohit De’s excellent book The People’s Constitution. Read this, for instance:“The BPA granted vast powers to the police and Prohibition officers. It empowered Prohibition officers and all police officers to “enter at any time, by day or by night, any warehouse, shop, house, building, vessel, vehicle, or enclosed place in which [they have] reason to believe [that] intoxicants or utensils, apparatus or implements used for manufacturing intoxicants are kept.” They could also open packages and confiscate goods that they suspected of containing illicit liquor. Warrants were not required for arrests for any of these offenses or for searching premises. The BPA provided that people believed to have committed an offense under the act could be detained without trial and have their movements restricted. The Prohibition policy thus created a system that operated outside the penal code and the criminal procedure code that applied to most offenses.” [The People’s Constitution, Rohit De, page 45]The direct consequences of this PolicyWTF aren’t hard to anticipate. People either switched to alternatives that bypassed the law or started consuming a far worse quality of alcohol in the black market. For instance, De writes:By 1963 the Planning Commission was protesting the number of tinctures available in India. It pointed out that the British Pharmacopeia had reduced the number of tinctures from thirty-four in 1932 to fourteen in 1963, but the Indian Pharmacopeia of 1955 listed forty-two different tinctures. After interviewing leading medical representatives, the Planning Commission came to the conclusion that there was hardly any medical use of tinctures, which were outmoded and being replaced by modern drugs that were not alcohol-based. Spot checks revealed that several tinctures on the market were actually spurious, consisting solely of alcohol and a suitable coloring agent. Other manufacturers were producing eardrops and eyedrops with a large percentage of alcohol. The frustrated Planning Commission suggested that tinctures be abandoned for more modern medicine and that industrially produced eyedrops and eardrops be replaced by prescriptions that could be made by pharmacists. [The People’s Constitution, Rohit De, page 61]Says a lot about central planning. When there’s demand, supply finds a way out in imaginative ways that governments can’t clamp down easily. Desai’s second prohibition was on the sale and holding of gold, even in small quantities. It was this policyWTF that made smuggling of gold a lucrative profession. Here’s what the Directorate of Revenue Intelligence — a union government agency — observed in its Smuggling in India Report 2019-20: The economic reforms of 1990s witnessed the repeal of the Gold (Control) Act, 1968 that had prohibited the import of gold except for jewellery. The erstwhile statute had led to the emergence of a notorious network of gold smugglers during 1970s and 1980s. The economic reforms and liberalisation led to the imposition of a modest specific duty of Rs 300 on 10 grams in 2011-12 (increased from Rs 200 in 2010-11) on the imported yellow metal, bringing gold smuggling almost to a grinding halt. While both these policies had immediate adverse consequences, the general equilibrium effect was far worse: the successful and respected people in the society were the ones whose only competence was breaking the law.PS: Nitin Pai, on his blog, succinctly captures the general equilibrium effects of banning victimless crimes in this figure.Source: What causes corruption and erosion of moral values?, Nitin Pai, The AcornGlobal Policy Watch: Student Loan Forgiveness and Friedman - RSJThe new Biden administration is expected to enact a student loan relief programme through legislation or an executive order when it assumes office later this month. There might even be a more comprehensive student loan reform on its agenda. The left-wing of the Democratic Party has made a case for a total student loan forgiveness for a long time now. Biden is a centrist, yet he might use the student loan relief proposal as a bargaining chip to rein in other more socialist ideas from them. It will be interesting to see if the administration merely forgives a part of the outstanding loan or it uses the student loan crisis to arrive at a more market-driven long-term solution to the problem of funding higher education and the role of government in education in general.Quantum Of CrisisThere are about 45 million student loan borrowers who owed roughly USD 1.6 trillion in 2019. To put that in perspective, India’s total credit outstanding is in the same ballpark. On average, each borrower has over USD 34,000 outstanding credit. By some estimates, the Biden forgiveness proposal is to waive off USD 10,000 from this. That would mean a total waiver of about USD 500 billion. No small change even in the days where stimulus packages routinely run into trillions.So, what explains these eye-popping numbers that are unique to the US education system?Well, there are a few reasons.Because the colleges can: There has been no disruption in the higher education model over the past two hundred years. The system is an oligopoly. The same set of universities have remained at the top through a combination of brand building, (alumni) network benefits and bigger endowments (that are tax-free). The price set at the top is high and everyone below the chain benchmarks to that price. As income inequality has grown, the price has gotten unaffordable at every level except the very top.Student loans are expensive by design: There’s hardly any collateral to hold as security for a student who is getting started in life. These loans are largely unsecured, unlike a mortgage where the house is the underlying security for the banks. The possibility of a student getting a good job and paying back the loan is relatively lower than most other loan types. Added to this is the uncertainty about the final location of the student after he finishes off his education and the costs of tracking them down. It is no surprise the default rates of these loans are in excess of 10 per cent. These uncertainties are baked into the pricing of a student loan. They tend to be long-term and expensive.Universities have no incentive to innovate: Why should they? They control their supply and keep college seats ‘scarce’. The admission rates of Ivy league schools have been coming down over the years. They are at sub-five per cent these days. This scarcity gives them enormous pricing power. They offer lifelong tenures to the professors. There’s hardly anyone who holds a university to account for failed careers of its students. The student cops most of the blame. It is a great business model with limited accountability. Here’s a sample statistic. Students at public four-year institutions paid an average of $3,190 in tuition fee for the 1987-1988 school year, with prices adjusted to reflect 2017 dollars. Thirty years later, that average has risen to $9,970 for the 2017-2018 school year. That’s over 200 per cent increase after adjusting for inflation. The entry-level salaries haven’t kept pace with that. After adjusting for inflation, they are almost flat over this time. This is what riles the ‘progressives’. The higher education system now perpetuates inequalities instead of reducing them. The system is rigged from the start - SAT scores track family income closely, private counsellors help kids from rich families to write their applications and expensive tuitions in drama, music or elite sports help in making the cut. The list of such privileges that are needed to get in is long. And the higher education system explains all of this away in the name of merit. The Moral Burden Of Student DebtThose who battle this entrenched system and take expensive loans to fund themselves can find the going tough. The job market remains choppy, the nature of jobs is changing and there’s increasing automation in every sector. To start your career with a debt that you can’t be sure of paying off is a burden that seems unjust. Worse, there are many others who can’t get a loan or don’t venture into higher education at all because the costs are high. It is a terrible loss of human potential. This much is commonly understood. The problem is with the solution that the ‘progressives’ advocate - a kind of a universal free higher education model best captured by Bernie Sanders line “College For All and Cancel All Student Debt”:Today, we say to our young people that we want you to get the best education that you can, regardless of the income of your family. Good jobs require a good education. That is why we are going to make public colleges and universities tuition free, and cancel all student debt. The problems with such prescriptions are aplenty. We have devoted multiple newsletters to them. When the price is zero, supply tends to zero. The inherent moral hazard of cancelling debts. What about those who actually paid their debts? What about those who didn’t take up college because they didn’t want to take debt? What about other borrowers who took other types of loans? Why should their debts be not cancelled? This a terrain full of moral hazard landmines.Government, Market and EducationSo how should we think about solving this? To start with we need to understand the market failures in the education system. What are they?Primary and secondary education has positive externalities. There’s a benefit that accrues to the society in educating one person which can’t be captured by the supplier. This restricts the supply of such goods because they can’t be priced accurately. The government has a role in addressing this failure through subsidies or vouchers. Higher education or vocational training are tailored to provide employment to an individual. The positive externalities here are overshadowed by the private economic benefits to an individual. So higher education doesn’t have this type of market failureBut it has other failures. One is the information asymmetry problem. You can never know how good a college is till after you finish college and enter the job market. The college and your goals aren’t exactly aligned. There’s no downside risk to the college if you don’t get the right kind of job after it. This asymmetry problem extends to the banks providing student loans. They don’t have enough information about either the student or the quality of college education to assess the risk of future payments. They err on the side of caution. The interesting thing is there’s a 65-year old paper authored by Milton Friedman that captures the role of the government in education. The 1965 paper ‘The Role of Government in Education’ is a document of remarkable clarity and vision even by Friedman standards. It is not a dogmatic advancement of the market as a solution to the problem of funding education. It is nuanced and deeply insightful about what the government should be doing in education. Friedman On Government In Education I will end with two key excerpts from it. First, Friedman’s views on primary and secondary education and the role of the government in it. His solution was simple - public financing but private operations of education in this space:“The arrangement that perhaps comes closest to being justified by these considerations--at least for primary and secondary education--is a mixed one under which governments would continue to administer some schools but parents who chose to send their children to other schools would be paid a sum equal to the estimated cost of educating a child in a government school, provided that at least this sum was spent on education in an approved school. This arrangement would meet the valid features of the "natural monopoly" argument, while at the same time it would permit competition to develop where it could. It would meet the just complaints of parents that if they send their children to private nonsubsidized schools they are required to pay twice for education--once in the form of general taxes and once directly--and in this way stimulate the development and improvement of such schools. The interjection of competition would do much to promote a healthy variety of schools. It would do much, also, to introduce flexibility into school systems. Not least of its benefits would be to make the salaries of school teachers responsive to market forces. It would thereby give governmental educational authorities an independent standard against which to judge salary scales and promote a more rapid adjustment to changes in conditions of demand or supply. “ The second excerpt is about how to think of funding higher education or vocational programmes taken to improve employment prospects. Friedman suggests an Income Share Agreement (ISA) model all those years ago.“For vocational education, the government, this time however the central government, might likewise deal directly with the individual seeking such education. If it did so, it would make funds available to him to finance his education, not as a subsidy but as "equity" capital. In return, he would obligate himself to pay the state a specified fraction of his earnings above some minimum, the fraction and minimum being determined to make the program self-financing. Such a program would eliminate existing imperfections in the capital market and so widen the opportunity of individuals to make productive investments in themselves while at the same time assuring that the costs are borne by those who benefit most directly rather than by the population at large. An alternative, and a highly desirable one if it is feasible, is to stimulate private arrangements directed toward the same end.” It is instructive to conclude here with Friedman’s conclusions from the paper:“This re-examination of the role of government in education suggests that the growth of governmental responsibility in this area has been unbalanced. Government has appropriately financed general education for citizenship, but in the process it has been led also to administer most of the schools that provide such education. Yet, as we have seen, the administration of schools is neither required by the financing of education, nor justifiable in its own right in a predominantly free enterprise society. Government has appropriately been concerned with widening the opportunity of young men and women to get professional and technical training, but it has sought to further this objective by the inappropriate means of subsidizing such education, largely in the form of making it available free or at a low price at governmentally operated schools. The lack of balance in governmental activity reflects primarily the failure to separate sharply the question what activities it is appropriate for government to finance from the question what activities it is appropriate for government to administer (emphasis ours)--a distinction that is important in other areas of government activity as well. Because the financing of general education by government is widely accepted, the provision of general education directly by govern mental bodies has also been accepted. But institutions that provide general education are especially well suited also to provide some kinds of vocational and professional education, so the acceptance of direct government provision of general education has led to the direct provision of vocational education. To complete the circle, the provision of vocational education has, in turn, meant that it too was financed by government, since financing has been predominantly of educational institutions not of particular kinds of educational services.” A Framework a Week: A Taxing Month AheadTools for thinking public policy— Pranay KotasthaneWhat’s a budget without new taxes, fees, cesses, or surcharges? As the budget date nears, let’s understand the categorical differences between these four seemingly interchangeable terms. A tax is the purest economic manifestation of the state’s monopoly over the legitimate use of force within its territory. That’s because a tax is not accompanied by the promise of any specific service by the government in return. The money raised from taxes goes into the consolidated fund of the relevant level of government. Then on, it’s the government’s prerogative to decide what this money should be spent on. So if you were to file a case refusing to pay income and property taxes on the grounds that the road outside your house is broken, you would’ve no chances of winning the case.A fee, in contrast, involves a quid pro quo. You pay for a service or good in return. When you pay a parking fee, you pay for the right to occupy a physical space for a specific period of time. The linkage between what you pay and what you get in return is much clearer than is the case with taxes. It is for this reason that collecting fees for private services is a less distortionary way of raising resources for local governments. We had covered this in more detail here. A cess is tied to an earmarked purpose. The money raised through a tax is held separately to fund a project that the cess is meant for. A Swachch Bharat Cess, for example, is a levy on services, the proceeds of which are used to fund the Swachch Bharat Abhiyaan. If you filed your income tax returns, you would have also noticed a health and education cess of 4 per cent. A legitimate question is that if this cess is being used to finance something as core as health and education, what were the taxes you pay being used for in the first place.Through some legal chicanery, the government has another advantage of raising money through the cess route. This money doesn’t fall in the divisible pool that needs to be shared with other levels of government. Unsurprisingly, the union government has been raising cesses to subvert the Finance Commission’s recommendation of devolving a larger chunk of the divisible pool of money to state governments.Surcharges are eviler. They are merely taxes on taxes. They are not raised for an earmarked purpose. Neither are the proceeds shared with lower levels of government.So that’s that. There are many ways in which governments can extract money from you, some better some worse. For more, read:Why cesses are evilCesses and Surcharges: Concept, Practice and Reform, A Fifteenth Finance Commission Study conducted by Vidhi Centre for Legal PolicyMatsyanyaaya: Decoupling DynamicsBig fish eating small fish = Foreign Policy in action— Pranay KotasthaneA lot has been written about businesses moving away from China as a fallout of geopolitical tensions with the US. Fewer write-ups have tried to imagine what this decoupling would actually look like. A recently released report by the European Union Chamber of Commerce in China & MERICS does a good job of analysing this process. The report breaks down decoupling into nine layers in four major categories:Macro decoupling – political and financial;Trade decoupling – supply chains and critical inputs; Innovation decoupling – research and development (R&D), and standards; and Digital decoupling – data governance, network equipment and telecommunications services Of these, the authors identify three layers of high concern — decoupling of critical inputs such as semiconductors, software, and rare earths, decoupling of data governance regimes, and decoupling of standards. In contrast, financial decoupling is less likely because of China’s inability to internationalise renminbi and its continued dependence on the US dollar even for its Belt and Road projects. In short, the US-China confrontation is likely to play out over critical and emerging technology and not over finance and industrial production. Finally, there’s a useful framework visualising how decoupling across the nine layers might look in three scenarios. Source: Decoupling, By European Union Chamber of Commerce in China and Mercator Institute of China StudiesHomeWorkReading and listening recommendations on public policy matters[Book Excerpt] Toppling the myth of meritocracy: Excerpt from Michael Sandel’s “Tyranny of Merit: What’s Become of the Common Good?”[Article] Robert Farrington writing in the Forbes: “The Moral Hazard Of Student Loan Forgiveness”[Article] Prohibition’s ghosts continue to linger in Mumbai, writes Shoaib Daniyal. Get on the email list at publicpolicy.substack.com

This newsletter is really a weekly public policy thought-letter. While excellent newsletters on specific themes within public policy already exist, this thought-letter is about frameworks, mental models, and key ideas that will hopefully help you think about any public policy problem in imaginative ways. It seeks to answer just one question: how do I think about a particular public policy problem/solution?PS: If you enjoy listening instead of reading, we have this edition available as an audio narration courtesy the good folks at Ad-Auris. If you have any feedback, please send it to us.PolicyWTF: What Broke the Constitution’s Seventh Schedule?This section looks at egregious public policies. Policies that make you go: WTF, Did that really happen?— Pranay KotasthaneThe Seventh Schedule of the Consitution has three lists scoping out the responsibilities of the parliament and the state legislatures. List I contains the subject-matters over which the parliament has exclusive power to make laws (defence, foreign affairs, banking etc.). List II does the same for state legislatures (health, public order, water, land, agriculture). List III contains subject-matters on which both the parliament and state legislatures can legislate (education, forests etc.). Looks neat. Except that this assignment of powers hasn’t stopped union governments from designing and funding hundreds of schemes that squarely fall under List II — National Health Mission, Swachch Bharat Mission, Pradhan Mantri Awas Yojana, to name a few. You would imagine that these schemes, known as Centrally Sponsored Schemes (CSS), would be opposed tooth and nail by state governments, right? Wrong. We’ve reached a low-level equilibrium where the state governments have grudgingly reconciled to the reality of CSS. They oppose it on paper or complain to Finance Commissions but are also happy to receive funds as part of these union government-sponsored schemes. And so, successive union governments have continued to misuse Article 282 of the Constitution — which permits union and states to make grants for any ‘public purpose’ regardless of where that purpose lies in the seventh schedule — to interfere with state subject-matters. With no clear effective assignment of responsibilities, it is not surprising that people expect prime ministers to provide them with water supplies, public order, and clean streets, none of which are union government subjects. Without a clear assignment, there is no way to fix accountability. Without accountability, citizen preferences don’t matter. The State does what it can and citizens endure because they must. In short, the Seventh Schedule is broken. As NK Singh, Chairman of the 15th Finance Commission argues: there’s a need to change the Seventh Schedule and Article 282, both. Absent that, we will keep CSS proliferating depending on how populist a union government wants to be. At present, there are approximately 211 schemes and sub-schemes under the 29 umbrella CSS!For more, read:Ten Little Schemes, my article for PragatiChapter 5, Review of Inter-Governmental Transfers and Consolidated Public Finance, Report of the Fourteenth Finance Commission, Volume 1.Rationalising Central Schemes, The Financial Express, M Govinda RaoIndia Policy Watch #1: Missing Artists in Our PolityInsights on burning policy issues in India— RSJThe farmers’ protests are now into their third week. The Union government seems to be in the mood for talks with farmer leaders now; after trying out the other alternatives, namely, barricading road, lathi-charging and using water cannons in cold Delhi winter. We aren’t sure about the kind of compromise that will be worked out. The track record of the government in arriving at a common ground isn’t great. That we have fluffed our lines on reforms in a sector that needs them direly is quite incredible. It is starker when you consider the numerous expert committees in the past that have recommended exactly what the new agriculture laws aim to achieve. These recommendations have had broad-based support from most political parties and even made their way into their election manifestos. With such support and history, you’d expect we would have got these much-needed reforms off the ground. Yet we are struggling with it. It’s an object lesson in public policy implementation.A Reform Whose Time Has ComeWe have made our arguments in support of farm reforms before. No one can claim with conviction our agriculture policies have been a success since independence. The entire agriculture value chain – from pricing, storage, distribution and purchase – has been in a regulatory chokehold that was designed during the early 60s. Faced with successive failures of monsoon and with the memory of famines (Bengal, particularly) still fresh, we had to seek US support to import food grains under the PL 480 scheme. The scars of that event led to the Green Revolution that saw a dramatic increase in agriculture productivity. Agriculture in India is a state subject. So, alongside the miracle of the Green Revolution, a majority of Indian states decided to enforce the Agricultural Produce and Market Regulation (APMR) to ensure food security. Soon, the purchase and the auction of food grains was restricted to the markets that were run by the state. The Agricultural Produce Market Committee (APMCs) and their mandis became the only legal buyer of the farmers’ produce. This was in keeping with the spirit of the times. The Indian state was in a massive expansion drive. It swallowed the whole of agriculture.What has the past half-a-century of this state control given us? It is important to summarise the points again to appreciate how the status quo cannot be the answer.We achieved food surplus by the early 80s, but we didn’t stop the Food Corporation of India (FCI) continue the practice of buying wheat and rice at Minimum Support Price (MSP). The MSPs have continued an upward trajectory ever since. Where are we today with this policy? The FCI godowns today are bursting at seams with about 100 million tonnes (MTs) of food grains as against the buffer requirement of about 40 MTs. The burden of supporting FCI procurement is a huge drain on the exchequer. The 2020 budget had set aside Rs 1.36 lakh crores as FCI borrowings to support the MSP regime. The unintended consequences of this borrowing on our fiscal health are a separate story. This is the price we pay to sustain MSP.The farmers of Punjab and Haryana who constitute the bulk of protesters have a reason to feel aggrieved with the dismantling of the current system. Take rice for example. Only about 12 per cent of farmers benefit from MSP in India. That same number is north of 90 per cent in Punjab and in a similar range in Haryana. MSP support to rice has created a scenario where a primarily wheat eating region like Punjab is the biggest producer of rice in the country. This coupled with free electricity to farmers has meant a significant reduction in groundwater levels in these states. The narrow focus on these two food grains has meant we run a deficit in other crops including dals, oilseeds and other cash crops. We import these while continuing to produce surplus rice and wheat every year. The local variety of grains that are hardy and require less water (jowar, bajra and ragi) have all but disappeared from our plates over the years. Separately, the desire to raise two crops every year leads to farmers in Punjab burn their stubble. This adds to Delhi’s gas-chamber like pollution. Lesson: incentives matter and negative externalities are real.The Essential Commodities Act (ECA) that runs in parallel with the APMC makes things worse. The Union government periodically imposes stock holding limits for various grains and takes away the market flexibility to manage supply-demand swings. This has meant there are no organised sector entities in the agriculture supply chain to manage the storage. No wonder tur dal or onion prices skyrocket at various times in the year. Our retail inflation sways to these price movements. The upshot of it all? Agriculture with about 16 per cent contribution to our GDP supports about 60 per cent of our population. Less than 1 per cent of farmers own 10 hectares of land that can be considered optimal to pursue agriculture as an enterprise. The rest are in subsistence farming. Like we have asked before, how can anyone argue to continue with this system?How Not To ReformDespite this, we seem to be in a situation where we have to negotiate and may be dilute the three bills that sought to reform the farm sector. The bills allowed the sale of farm produce to players outside APMC, relaxed stocking restrictions under the ECA and enabled contract farming. The problem was correctly diagnosed, and the right solution offered. So, what could go wrong?Agriculture is a state subject. Any big reform needs consultations with state governments, farmers, and the opposition. Since a broad consensus on these reforms had emerged from the reports of various expert panels over the years, this could have been a process less fraught than what has been seen in the case of GST or other reforms that needed a federal consensus. Yet there were no deliberations. The manner of passing the bill especially in Rajya Sabha where a debate was avoided, and a voice vote was used to pass them through betrayed a lack of faith in parliamentary procedures.There is a strong desire for a big reveal that underlines the way the PM operates. This is how all key measures – from demonetisation, amending Article 370, CAA and labour reforms – have been announced and then pushed through. The desire to stun the nation with a bold move is seen to be the key to make a decision. This doesn’t help in managing change that big reforms entail. There is wider anxiety among the impacted stakeholders if things aren’t discussed and deliberated. This is further stoked by the minority that wants to stonewall these reforms. The opposition also latched on to this opportunistically. That’s how this has played out. Then the usual bogey of big corporates (Ambani and Adani) was raised. There’s always a currency for this in India.The desire and speed for a bold move have invariably meant poor anticipation of unintended consequences of these reforms. Clauses that can only be called illiberal have seen their way through these laws including those where the executive is given powers to adjudicate with no remedial mechanism to appeal against the decision in civil courts. This won’t stand in any court of law.Lastly, when confronted with the first signs of protests, the entire playbook of how not to manage protests was put into action. First, the police force was deployed to break the protests. Then the protesters were dismissed as rich farmers or middlemen protecting their turf. Finally, they were branded terrorists and anti-nationals before some mediation was attempted. Missing Artists? The unfortunate outcome of this might be the wrong lessons we will learn for future – that reforms are difficult to implement. Further, as Pratap Bhanu Mehta writes in the Indian Express there is a greater loss to the polity that’s likely:“Chances are that, for the moment, given its overwhelming power, the government will ride out the protests. But the simmering discontent will remain. Cooperative federalism is in tatters, and the weakness of political parties means protests now take an amorphous form. Given the far-reaching changes we need in agriculture in Punjab, it is important that the trust between the state and the farmer remains. A good faith dialogue that gives the farmers reasonable assurances and a face-saver is necessary. It is easy for the government to win. But how many times in Indian politics have we won short-term victories that create long-term political precariousness?”Over the years we have gotten used to the many reasons why we haven’t seen structural reforms gather pace in India. These have ranged from coalition compulsions, lack of majority in both houses, absence of political will, obstructionist opposition or ‘too much democracy’. As the farm reforms saga shows, these are mere ruses. Politics is the art of possible. And we are missing those artists. India Policy Watch #2: Lessons for Politics in Radically Networked SocietiesInsights on burning policy issues in India— Pranay KotasthaneBeyond the specifics of India’s agriculture, some broader lessons come out of the ongoing logjam for politics and policymaking. Some quick intuitions here: Vocal Local is also the Global. The Canadian PM’s comments are an indication of a broader trend. No political issue is purely “internal” to a State anymore, at least as far as narrative-building is concerned. With networked communities, this trend will become stronger as outrage is the new form of entertainment. A corollary is that stakeholders with more narrative power but little interest in the issue can end up setting the narrative. Just like the ISI using this issue to fan Khalistani separatism again.Popular governments will try to bypass parliaments in crises citing the need for fast-tracking reforms in the backdrop of COVID-19.More of the same. No statement or action by the government and the opposition suggests a realisation that they aren’t willing to come together to tide over India’s first recession after 40 years. Unfortunate.HomeWorkReading and listening recommendations on public policy matters[Article] Sandip Das on “A fiscal crisis: Why FCI needs provisioning in food subsidy”[Podcast] On Puliyabaazi, Saurabh and Pranay speak to Gunwant Patil of the Shetkari Sangathana Farmers’ Movement on the three farm laws.If you like the kind of things this newsletter talks about, consider taking up the Takshashila Institution’s Post Graduate Programme in Public Policy (PGP) course. It’s a 48-week in-depth online course meant for working professionals. Applications for the Jan 2021 cohort are now open. For more details, check here. Get on the email list at publicpolicy.substack.com

CM Ashok Gehlot called Sachin Pilot good for nothing, the 15th Finance Commission is in the process of devising a development matrix, the prestigious Ballon d'Or will not be awarded this year & other top stories making in your morning news bulletin.

A running theme during this lockdown period and of the handling of the COVID-19 pandemic in general so far is that decision-making has been largely centralised while the fact is that it is the States that bear responsibility for the real frontline battles against the pandemic. So we'll look at the sharing of funds between Centre and State governments and take both a long-term and short-term view. What was the balance like between State and Centre before the pandemic hit? At different phases in our history there are ebbs and flow toward greater decentralisation or greater Central control. At which juncture in that curve do we happen to be in now? More immediately, States are desperately short of funds, especially now with economic activity being almost absent for the past month-and-a-half. How can this problem be addressed? The key strategy is fiscal empowerment of States Our guest today is M. Govinda Roa, an economist who was a former member of the 14th Finance Commission. He is a regular columnist for The Hindu on these issues. Find the In Focus podcast on Spotify, Apple Podcasts and Stitcher. Search for In Focus by The Hindu. Write to us with comments and feedback at socmed4@thehindu.co.in

This week, we discuss the global Coronavirus pandemic that has effectively brought normal life to a full stop in India through a Centre-enforced lockdown. The importance of social distancing cannot be stressed enough. But this also has huge repercussions on our livelihoods and the economy, which has already been suffering a slowdown over the last year. To discuss this, are Dr. Naushad Forbes (former president, Confederation of Indian Industry; co-chair, Forbes Marshall) and M. Govinda Rao (economist, former member of 14th Finance Commission).

The 15th Finance Commission has come out with a slew of recommendations. Which states stand to gain and which ones stand to lose? Anupam Manur and Pranay Kotasthane examine some of the implications of the commission's interim report.Follow:Anupam on Twitter: @anupammanurPranay Kotasthane on Twitter: @pranaykotas

India is a Union of States, and Indian Republic's federal nature has been hardcoded into the Constitution. While political federalism is important, control over the purse strings often makes or breaks federalism. Pranay Kotasthane returns to The Pragati Podcast to help us understand how fiscal federalism works in India. Pranay and Pavan talk about the Finance Commission, recent developments and debates, and how the Planning Commission played an overwhelming role in fiscal federalism till it was abolished. The Pragati Podcast is a weekly talkshow on public policy, economics and international relations hosted by Pavan Srinath. Pranay Kotasthane is the Head of Policy Research at the Takshashila Institution and hosts the Puliyabaazi Hindi Podcast. Follow The Pragati Podcast on Instagram: https://instagram.com/pragatipod Follow Pragati on Twitter: https://twitter.com/thinkpragati Follow Pragati on Facebook: https://facebook.com/thinkpragati