Rebooting India: Realizing a Billion Aspirations (32 page)

Let’s revisit Dharavi’s Pitkekar family, who we mentioned earlier in the book, and take stock of the socio-economic climate around them. Mallava Pitkekar, who worked for Rs 1.25 a day sorting through trash, probably had a vision for the future that did not extend further than the holy trinity of the 1970s—‘
roti, kapda aur makaan
’ (food, clothing and housing). A simple calculation tells us that, not accounting for inflation, the entire GDP of India in 1970 was equivalent to just two years of social security expenditure in today’s India. As Mallava’s son Rayappa began the climb to prosperity with his leather business, the economic liberalization of the 1990s began. No longer were people content with the bare necessities; they wanted a better quality of life, encapsulated in the new trinity of ‘
bijli, sadak, pani
’ (electricity, roads, water). Now, Rayappa’s children’s ambitions far outstrip the current pace of economic growth; we believe theirs is the generation who will espouse the digital mantra of ‘Jan Dhan, Aadhaar, Mobile’—the JAM trinity—as the key to a promising future.

If Mallava received a government pension, it would be easy for the administration to track whether money had been deposited in her account, and was duly withdrawn. In Rayappa’s case, the data from his business transactions captured by the GSTN could be used to assess his creditworthiness, and help to secure him a loan. The government would play a more indirect role here, regulating an ecosystem of data sharing, credit ratings and risk distribution. When it comes to Rayappa’s children, if they receive education scholarships, the money can be directly transferred into their bank accounts. As they pursue advanced studies, their degree certificates, a proof of their human capital, will be available in a digital locker.

All these data platforms would make it possible for the government to provide individualized services to every citizen, rather than monitoring only aggregate outcomes; e-commerce companies already operate on this model. If we want to leapfrog over our existing problems to become a major player on the global stage, this is the only route we can take. However, we reiterate that business as usual simply will not do. One and a quarter billion people are asking for change, and they want it now; technology is the only
answer to their questions. Traditionally, government has bought and used technology simply as a tool to automate processes—maintaining electronic instead of paper records, for example—but the citizen experience remains largely unaltered. This is not what we mean by a technology-enabled solution. We are talking about radically reimagining government, its purpose, its role and the way it carries out its functions, with technology at its core.

Every attempt at reform must sooner or later tackle the endemic corruption that bedevils our administrative machinery. Virtually every day, newspaper headlines shriek about yet another scam unearthed—2G, Saradha, Vyapam, the list goes on—which then quickly descend into a welter of accusations traded back and forth. A closer look reveals that every one of these scams can be traced to an underlying systemic issue. With a well-planned, auction-based system to allot spectrum licences to telecom companies, there would be no 2G scam. With universal financial inclusion through formal systems, there would be no Saradha scam. With enough colleges offering quality education and with enough employment opportunities for qualified individuals, there would be no Vyapam scam.

Even now, scams can be averted by creating stronger systems. It doesn’t take a crystal ball to predict where scams will occur—they happen when the government is a buyer, seller or regulator capable of causing huge profits or losses to firms at the stroke of a pen. They happen when goods are sold at subsidized prices ostensibly to benefit the needy, a situation ripe for exploitation and diversion. They happen when there are shortages—a shortage of seats in schools and colleges, for example, or a shortage of jobs. They happen when ambiguous rules around taxation and compliance create opportunities for bribes. They happen when products and services become monopolies. They happen when the government, rather than the market, sets prices. Every one of these distortions, and many more besides, can be resolved with the use of data and technology.

To some people, a future in which technology assumes such a primary role is an Orwellian dystopia. How do we safeguard ourselves against such a scenario? We must first realize that it’s not just the government’s data collection systems we should be concerned about; private organizations also collect and analyse large amounts of consumer information. While government must operate under the strict set of rules to which it is bound, it is essential that a strong privacy and data protection law be put in place. Some also fear that the government can use this data against its own people. Given that the government holds the monopoly on creating laws, this is a valid concern.

Here is where we must turn our attention towards the design of our institutions, the separation of powers, and the checks and balances that prevent the system from running amok. Data protection laws should defend not only the individual’s right to privacy but also confer protection from the government itself. However, we must ultimately recognize that one cannot operate within government to bring about widespread change with a mindset of complete mistrust. Healthy scepticism aside, we must put our faith in a system that has worked for the last sixty-eight years, and shift our focus to creating institutions that deliver.

India is often said to be beset by the ‘curse of informality’. Nearly three-fourths of all employment is in the informal sector
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—millions of farmers tilling tiny patches of land, retailers running cramped shops, women selling vegetables by the roadside. A common solution to ‘formalize’ our economy is to adopt the industrial model, building organized factories staffed by thousands of employees, creating a network of organized retail outlets, and promoting large organized farms, which can run into thousands of hectares. This is the route the western world took in the twentieth century. But is this really a twenty-first century plan for India?

With the advent of technology, we think there is an entirely new way of formalizing the economy. With smartphones becoming increasingly ubiquitous, we can harness the power of cloud computing, big data and analytics to move towards a different kind of aggregation, one that is gaining traction in the private sector. Today, taxi services like Ola and Uber are aggregators, organizing thousands of individual drivers on a single platform. By pooling the homes and spare bedrooms of thousands of people, Airbnb now has more rooms than the biggest hotel chains. In India, Oyo Rooms has achieved much the same with budget hotels. Flipkart and Amazon provide marketplaces where merchants sell just about anything to hundreds of millions of customers.

In his pioneering article, ‘The Nature of the Firm’, written in 1937, the economist Ronald Coase argued that the costs of carrying out transactions—the costs of search and information, coordination and contracting—meant that it made better financial sense for people to organize themselves into firms. As the friction around these costs grew, firms themselves would keep expanding. While this was an accurate worldview in 1937, today technology has upended Coase’s law. Perhaps India can retain the small retailer, the small farmer and the small entrepreneur; instead of converting them into faceless employees of large firms, we can bring them ‘on the grid’. With their smartphones, they will have access to the best technology, supplies and information, bringing markets closer and allowing them to make a living for themselves.

All the government needs to do is to create a strong regulatory regime, and operate effective social safety nets. A million farmers, a million entrepreneurs and a million retailers, organized through technology into virtual platforms, would be a very potent force promoting job creation, innovation and creativity. This approach ties in neatly with our constraints as a nation, whether it’s the scarcity of land in urban areas, the difficulty of land acquisition and aggregation, or simply the context of our political economy and bottom-up democracy. If we are to usher India into a new era of growth, the way we organize our people and their economic principles needs to be reimagined from the ground up.

Not just our economy but the very structure of our government needs a rethink. Gone are the days when the centre used money as a stick to get the states in line. While the Constitution of India recognizes states as equal partners, the balance of power tilted away from them in the past, making them increasingly dependent on the centre for funds. Today, many of our states are well run, and with the formation of the NITI Aayog and the upcoming GST reform, they will achieve further fiscal independence. Money is no longer the motive force for change—you can’t drive reform through fiscal initiatives. Under the latest budget and the recommendations of the fourteenth Finance Commission, the centre will share 42 per cent of its revenue with the states, as opposed to 32 per cent in 2014–15.
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So, a significantly larger chunk of funds will now be provided by the centre to the states as untied funds.

We recollect an example from a state revenue officer. He explained that in a particular year, the amount allocated to the state’s midday-meal scheme by the centre was only 80 per cent of the total budget. What was the state to do now? Could it cite the budget shortfall as a reason to stop serving meals to students? Obviously not. One solution would be to channel funds from another budget head to the midday-meal scheme to keep it going. But money received from the centre is usually earmarked for a specific purpose, and cannot be used elsewhere, no matter how pressing the need. These issues of fund flow can be resolved by cutting down the number of schemes and running them more efficiently; equally important, a greater proportion of central funds should be untied, eliminating restrictions on how this money can be spent and allowing states to manage their money more effectively.

Increasingly, India is getting to a point where money itself is no longer the bottleneck. The finances of many states are quite robust. The centre–state relationship has evolved to the point where we believe that the centre must provide value beyond money through world-class platform development. States should be free to opt for these common platforms because they see a clear benefit in participation, rather than
through the carrot of money or the stick of legislation. The GSTN is one such partnership. Aadhaar and the redesign of social security schemes is another such partnership. Electronic toll, once it goes beyond national highways to become a common platform for all transport-related payments, will become another key initiative. The Expenditure Information Network, once operational, will streamline fund flow, utilization and monitoring. Every platform we have discussed in this book has the potential to reshape the centre–state–local government partnerships and give us a new form of governance. This, we believe, is what true cooperative federalism is all about.

For most people, interacting with the state is a stressful and arduous task. Standing in long queues, the lack of access to information, waiting endlessly for rations, negotiating with corrupt officials—these are just some of the irritants, both major and minor, that people must deal with. Is there a way we can smoothen out these bumps, in effect rendering the state ‘invisible’ to the people? The ideas in this book lay out a concrete road map to achieve this vision.

The biggest barrier to the ideas we propose in this book is mindsets. In a system that clings tenaciously to hierarchy, it is hard to recognize that a twenty-five-year-old ‘techie’ might have better ideas than the veteran official in his fifties. That value and knowledge lie not at the top of a silo, but at the boundaries across varied disciplines. That problem-solving is not about big budgets and a cast of thousands, but small teams with shoestring budgets—teams that include technologists, social activists, people who have built successful businesses, domain experts and bureaucrats. That we have to try often and fail fast without getting bogged down by the armchair experts and critics ready to pounce on the first sign of failure. That it is easier to find fraud by analysing data rather than harassing citizens. That corruption can be eliminated not by having more laws, more inspectors and more ombudsmen, but by reimagining the processes that allow corruption to flourish in the first place. That it is better to have no entry barriers
to government systems, allowing people to enter freely with data and technology used to detect fraud, rather than creating more hurdles for people wanting access to benefits and services. That government should build minimalistic platforms and let the creativity of the people drive innovation. That the best ideas can be found anywhere, not just in the halls of government. That the best solutions are not based on precedents from the past, but are rooted in anticipation of the future.