Civil Service Recruitment.

The recommendations given by administrative reforms commission (ARC)regarding the recruitment process for civil service suggested that the age of recruitment to be reduced to a band of 21-25 years.

Keeping in view that the best talent should come to civil services; the above recommendations are ill conceived.

The average age at which one finishes their post graduation is about 24 years. The average age at one finishes his or her medicine is 24 years. The above recommendations completely bars post graduates and doctors from entering civil services.

Many people would like to join the civil services after they realize that corporate sector though more lucrative will not fulfill their aspirations of serving their country. There are many examples of people who were gainfully employed in the private sector after their MBA from IIMs who quit their corporate jobs to serve their country. The recommendations of civil service reforms would bar them also and the country will also loose talent who are coming from prestigious IIMs with rich experience in corporate world.

Further, the recommendations if accepted will act as a deterrent for people in group C and D posts who are motivated to go up the hierarchy very quickly seeing the apathy in their organizations.

Semi urban and rural people will be hit the hardest who for various reasons cannot complete their graduation by 24.

Civil services being a generalist domain must give opportunity to everyone. Post graduates and medical students will miss the bus forever if such ill conceived recommendations are accepted.

ARC must on the other and must take a serious look at working of UPSC.

UPSC must look at making the process of recruitment more scientific by cutting number of optional subjects, giving more weightage to general studies and testing candidates to reason, argue, defend and analyze the burning subjects rather than testing a candidate's mere memory.

ARC must question the UPSC about the rationale for evaluation. How is that the UPSC is evaluating mathematics, physics one one hand and philosophy and sociology on the other hand for the same marks. How can this be done scientifically? how can philosophy be weighed with mathematics?

UPSC being a constitutional body cannot be questioned. But a time frame of one year to complete the recruitment process for coveted IAS,IPS and other group A posts is truly obnoxious and unthinkable.One year is too long a time and too precious. UPSC should first cut the duration it takes to recuit personnel to coveted posts.

Age must never be a constraint for talented individuals for entering civil services. The criteria must be the depth of understanding, width of knowledge and sharpness in logic and reason.

Nuclear Deal

This is the article i wrote for the The Hindu Business Line, an abridged version of which was published on September 22, 2008. 

The recent waiver to India in the NSG has created euphoria in certain sections of the society and a mood of contemplation in certain other sections. While some people have hailed Dr Manmohan singh for championing the deal and have even termed it "historic" comparable to the economic reforms of 1991, few other experts have expressed their reservations.

 

Whatever the case may be, the waiver definitely marks a watershed in the country's history. The waiver speaks volumes for the status of India in world affairs. It is another matter if the deal really materializes, but the very fact that India is waived from the obligations that other countries have to fulfill for getting into nuclear commerce speaks for itself the status of India vis-a-vis other nations. There are many reasons for this. We may today be recognized as an economic world power, but our commitment to non proliferation is impeccable. If the world trusts us for our non proliferation and our voluntary moratorium on nuclear testing, it is because of our history and the people who made them. It is not only economics that Indian today is recognized for but for its moral and ethical values.

 

India must really put this new found ground to good effect. There are many international issues that we can now turn to our advantage. For instance climate change, IMF voting rights, questions on Iran and Afghanistan. More important of all is the question of terror. It is high time that the government takes some harsh steps towards the terrorists. We must all hang our heads in shame to the fact that our country which commands majority opinion in world politics has to witness a bomb blast every two months. People in power must go beyond only condemning the blasts to taking some concrete steps in fighting terror. It is frustrating for every Indian to see a bomb blast every other month.

 

Coming to the core issue of nuclear deal, many political parties have blamed UPA for the deal. BJP in particular is accusing UPA for parking national sovereignty as hostage to the US. These are very irresponsible statements by such a big national party. The real benefits of the nuclear trade go beyond just nuclear fuel supply. It creates employment, brings electricity, brings expertise and technology for our engineers to complete the nuclear cycle fast. More than anything it helps fight climate change.  Technology that accompanies trade will put India into a higher trajectory of growth.

 

Another controversial issue is that of nuclear weapon testing. Independent of the nuke deal, another test will have negative economic and political ramifications. Coming to the issue of testing vis-a-vis nuke deal, one question we must answer at this juncture is, Do we really need to test another weapon in future?  We are a peace loving country heavily influenced by Gandhian philosophy. Philosophy apart, is there a real need to test in future? Most of the opinion is concentrated around the argument that what if China or Pakistan test tomorrow?  One simple answer is that "so what"? Even today, all the three countries have weapons to destroy each other and even the whole world. Possession of nuclear weapon is a deterrent for all the countries in question to use them. In the event of a first attack from Pakistan or china, India has enough nuclear weapon to retaliate. Any new technology can only bring about a catastrophe faster. Given the fact that all the countries have enough arsenal to destroy each other, what is the need for future testing. Existing technology can end humanity in few minutes, is there a need to scale this?

Fiscal vs Monetary policies to contain inflation

The first quarter review of the monetary policy by the RBI makes the priorities of central bank very clear. It has Inflation control on high priority and rightly so.

Inflation is affecting millions of people across the length and breadth of the nation and has to be tackled on priority. Growth definitely will be hurt over the short term but it is the price one has to pay.

But the latest hike in CRR and Repo rates has attracted criticisms from the champions of industry and also by certain academicians. let us look at the options available with RBI and try to see what else RBI could have done.

Central banks around the world use interest rates as the single biggest tool to affect changes in the money supply and hope to control inflation through this. However, though inflation is not only a monetary phenomenon. In the context of recent inflation experiences in India, fiscal solutions would do greater help. Waivers of farm loans, reduction of income taxes, and implementation of 6 pay commission report would do more harm than good so far as inflation control is concerned. States are doing no better by giving free power to farmers and giving heavy subsidy on fertilizers. The bill for all such fiscal programmes and incentives offsets the measures by RBI to contain money supply. In fact the monetary and fiscal policies are moving mutually contradicting directions. The former is sucking liquidity and the latter is indirectly injecting it by subsidies, loan waivers etc.

Therefore RBI is using its limited tools to its best from the monetary angle to contain inflation.

It is true that higher interest rates will affect growth. But one must realize that that this would be over the short term. The cash parked at the RBI by banks (CRR) would be liberalized once the inflation will come under control. This is unlike loan waivers and pay increases which are a permanent invoice to the treasury. The CRR parked would become capital over the medium term.

Beyond Horrad and Domar model, one school of economics defines growth as difference between money supply and inflation. (Growth=Money supply-inflation). Looking at the equation, money supply can be increased to increase growth, but one cannot do it without inflation increase. But one can reduce inflation by keeping money supply constant by fiscal policies and thereby increase growth. As far as monetary policy is concerned, RBI has just reduced money supply in the hope of reducing inflation thereby sustaining the left hand side around 8 percent. This is at best what it can do.

Arguing from the horrad and domar perspective, high CRR and repo rates would also augment savings(because of higher interest rates on deposits), which will turn into investment over the medium term and increase growth provided the capital output ratio remains constant.

Monetary policy can only affect growth (as well as inflation) over short terms. Once inflation is under control, monetary loosening will have to start. Sound fiscal policies should back monetary loosening if growth should sustain without intermissions.

Given the limited scope of monetary policy, RBI would continue to tighten the money supply till it feels that the tightening has had some appreciable outcome.

Deciphering the Relation between Food prices, Inflation and CRR

Rising prices are affecting millions of people throughout the country. Inflation has hit the poor and the poorest the hardest. Ours being predominantly a rural nation needs to address issues concerning the largest section of the society on priority. Skyrocketing inflation numbers which crossed 7% recently has put considerable pressure on many families. The official inflation numbers based on wholesale price index is not the actual measure of the kind of pressure experienced by families across the length and breadth of the nation. A more realistic measure namely the consumer price index (Which is the official measure of inflation in many western countries) is considerably more than WPI. Further, the absolute inflation measured in terms of individual prices of essential commodities is well above the official WPI and CPI inflation.

The situation can get complicated if food and cash crop do not register a significant increase compared to 2007-08. (production of wheat in 2007-08 was more than 2006-07).The un seasonal rains in southern India and accompanying loss of crops in many parts of Karnataka ,Tamil nadu,Andra Pradesh and Maharashtra in recent weeks is likely to put considerable pressure on production of pulses. If this case emerges, large scale imports of pulses will become inevitable.

Indirectly, inflation is the cause and effect of Inflation. Higher inflation will put pressure on RBI to increase CRR which will harden interest rates. The recent hike in CRR to 8% will only add up to the higher interest rates of the bank. The higher interest rate will buttress the capital inflow from outside the country particularly from countries with low interest rates. This will further add up to liquidity in the system resulting in inflation. This is exactly opposite to what the doctor ordered. The RBI will again have to resort to hike in CRR or in open market operations. For more than a year now, the RBI is resorting to hiking CRR at regular intervals and also running out of government securities. This is not a very healthy sign for the road to capital account convertibility. So the RBI is caught up in the vicious circle of sterilization-capital inflow-sterilization. In other words, an increase in interest rate is bringing more capital flows, to stop this capital’s entry into the system, the RBI increases CRR which will again bring in more capital.

Moreover, the high Repo rate regime is not helping control inflation either. The relative ease with which the business and international banks can borrow funds from outside the country with lower rate of interest is not putting any pressure on commercial banks to borrow from RBI. This technique inevitably brings in foreign exchange leading to excess liquidity, fuelling inflation and making the rupee dearer vis-à-vis dollar.

Of course the RBI is doing whatever it can from the monetary policy point of view. CRR is the most powerful tool available with RBI to reduce velocity of money. But one must understand here that CRR has very marginal influence on food prices which in the greatest economic problem engulfing us. Hike in CRR may at best prevent people from borrowing for luxury goods, high end technology and real estate. (Human appetite is not a function of quantity of money; people will not eat more if they have more money). Hike in CRR is only going to put brakes on our industrial production with only a notional impact on lowering food prices. Moderate inflation in industrial products is not a grave concern now. In fact Inflation of about 6 to 7% in industrial goods will create Employment, Boost industrial production and bring capital.

It’s high time that government focused on Inflation numbers for agricultural products, essential goods and overall food basket.

Fiscal the only alternative:

We must understand that Inflation is not only a monetary phenomenon. Inflation targeting must be done from both monetary and Fiscal platforms. On the fiscal front, the government must first ban future trading in essential commodities, ban retail traders from getting listed in stock markets and floating shares No effort must be spared to track and punish hoarders. Government will do well to revive the PDS system and dispense the notion of BPL beneficiaries and provide food for all.

Another burning issue is that of agricultural land. Of what use are cars and bikes if 400 million people in our country cannot get one square meal a day? It’s high time for government to reconsider its Industrial policy (SEZ policy).

Intercropping, Soil conservation, Afforestation, agricultural research and pest management must be given fillip and government needs to invest in these areas on priority along with NREGA and female education.

Role of RBI:

It is estimated that subsidies on select petro products in 2007-08 are likely to exceed 60,000 crores. Also, the supply constraints due to inadequate output of Wheat, Pulses and Edible oils will fuel inflation if imports in required quantities cannot be secured. Inadequate supply of essential products coupled with high crude prices may push the whole sale price index inflation to over 10%.

A stronger rupee will make our imports cheaper. Inflation targeting becomes much easier with a stronger rupee. If the RBI intervenes in the exchange rate market, it would actually be hampering the inflation curbing process. RBI certainly needs to protect our exporters, but its intervention to contain the appreciating rupee will be desirable when inflation (particularly primary goods prices) becomes sustainable and supply side of essential commodities augmented.

Most of India’s export earnings are trough software and services. Businesses of these goods and services operate at greater profit margins. So an appreciating rupee must not hurt their profit margins to alarming levels as compared to alarming levels of inflation hurting millions of people.

Dr Y.V.Reddy, governor of RBI in his inaugural address at a conference on advances in open economy macroeconomics held on 19 March 2007 in Mumbai said “If the domestic inflation rate of an economy, however low it may be, is higher than the average inflation rate of its trading partners, it puts pressure on exchange rate. In this context, the question of simultaneous balance of internal and external sector becomes a major issue if flexibilities in the economy are less than adequate. The conduct of monetary policy inevitably involves a careful judgment on relative weights assigned to domestic and global factors and conduct reassessment and rebalancing of these in response to evolving circumstances.” We must note here that India’s inflation is more than double compared to our primary trading partners (U.S.A and U.K). Commensurate with this our central bank should keep itself away from the exchange rate market. On the longer run the market forces will automatically take care of the exchange rate once the inflation difference between trading partners reaches manageable levels and movement of funds across seas stabilizes.

It’s worthwhile to note here that the export earnings of India contribute to about 13 to 15% of GDP. The monetary authorities should not hurry up and express great apprehensions over appreciating rupee.

At the moment its better that RBI keeps itself away from the exchange rate market and allows the market forces to operate. RBI would do well to shed off its obsession over CRR and look for alternatives. RBI must cajole banks to provide credit for agricultural activities.
Its time the RBI takes a serious look at its foreign exchange stocks. Investing a part of this reserve for revamping rural infrastructure in definitely a viable option given our strong macroeconomic fundamentals

To conclude, RBI and other fiscal and monetary authorities must devise a scheme to distinguish food inflation from Inflation per se, move away from traditional instruments, come out of the vicious circle of Sterilization-Capital inflows-sterilizations and creatively use the inflowing capital as real capital to fuel the growth of Emerging and enlightened India.


[Letters published in the Hindu Businessline on the subject http://www.thehindubusinessline.in/2008/05/15/stories/2008051550160803.htm 

REVAMPING GRIEVANCE REDRESSAL SYSTEM

The irony of our nation is that we are very proud of our vibrant democracy and at the same time the trust and confidence on our elected representatives are at negligible levels. Most Urban people have lost trust on their representatives and the rural masses are most times exploited by their representatives.

The next level of public office is with the bureaucracy. Though we have some of the brightest and dynamic people occupying prominent positions in bureaucracy, they are at most times not the first (and sometimes not even the final) point of contact.

This leaves the grievance redressal mechanism with the lower rungs of bureaucracy. There are many problems at this level. Many times the grievance is not admitted and worse is the worm of “passing the buck” that has penetrated deep into Indian bureaucracy. Most officials do not assume responsibility and make aggrieved people run from pillar to post. In other words, most people lose hope of getting their grievance addressed as they do not know whom to approach or contact.

There are some fine online grievance redressal systems in place which altogether eliminates harassment of public by officials. One such is the online portal run by department of administrative reforms and public grievance, government of India.

But still one issue remains unanswered. How will people without access to internet record their grievance? India being still one of the poorest in the world has millions struggling to meet their ends. We have hundreds of thousands of people who are beneficiaries of government services but only on paper. Actual services do not reach them. Those millions also lose hope as they do not know whom to approach or even if they approach, they are denied their rights and exploited. (Else why do we see hundreds of people visiting governor of Karnataka from far flung areas every week?).

Below I make an attempt to take a holistic view of the situation and suggest an E-governance mechanism to overcome the loopholes and flaws inherent in the present grievance redressal system (GRS).

The flow chart below gives the brief outline as to how the new mechanism works.

The new system altogether eliminates the problem of finding the right man to contact. It also doesn't require the aggrieved to travel long distances to concerned offices to get his problem addressed.

The new system works on the below lines;

1.  The aggrieved can walk into any public office, be it a bank, Police station, Post office etc with a hard copy (hand written) of his grievance. He can also carry a soft copy if he can prepare one.

2.   A clerk or an officer in the public office will collect his/her grievance, scan it and send it to a centralized grievance cell (CGC) by E-mail. (No exclusive officer needs to be appointed for this as any clerk can do this job in addition to his normal duties. (Work load will not increase dramatically as the number of public offices in a locality will be proportional to the population)

3.   The CGC will have few employees exclusively to receive, segregate and forward the mails (grievances) to the concerned authority.

4.   As the CGC forwards the mail to the concerned stipulating a time frame in which it should be addressed, a copy of the mail is automatically sent to lokayukta, which will store it in its database.

5. The concerned authority should act within the stipulated time and respond to the aggrieved. The response is also automatically rooted to lokayukta.

6.  As cross verification, the lokayukta can inspect the action taken if it so desires.

7.  In case no action is taken within the stipulated time, the mail from the lokayukta database automatically pops up reminding the authority.

8. Furthermore if no action is taken, the lokayukta can penalize the concerned authority.

The entire working is schematically shown in the flow chart above.

It is noticed that Information commission and NREGA are functioning very well as it is given a legal status.

In line with information commission, a grievance commission can be created which looks into functioning of CGC. If it is felt that the work load on employees in public offices is increased, a grievance officer in every public office can be created in line with information officer. The grievance officer can function as a part time clerk to attend to other duties also.