Let's make dosanomics' palatable, it will help all

Capital allocation must strictly follow a measurable revenue stream.

Great Britain, ironically, followed India last Friday by rejecting its long-held belief in an open economy with fiscal stability and competitiveness as the drivers of sustained growth. This is also the essence of “dosanomics”, espoused in India by outgoing RBI Governor Raghuram Rajan. Despite the context being completely different in Britain and India, popular sentiment in both curiously worked to a common purpose. The bottomline in both nations is that ordinary people, who haven’t benefited from liberalisation over the past three decades, have become cynical about giving up their today for an elusive tomorrow. Both in wealthy Britain, where the poverty-level income for a family of four is £1,000 per month (around Rs 90,000) and in poor India, where it’s just Rs 4,000, the popular demand is a better quality of life for working-class people, as distinct from the middle class.

Strikingly, stagnating productivity has reduced real incomes of workers in both countries. Similarly, the divide between India and Bharat is mirrored in the divide between shining London, that voted overwhelmingly to stay in the EU because it benefits directly from globalisation, and lacklustre Yorkshire and Humber, which voted to exit, because they don’t. Add a dash of xenophobia at the prospect of locals losing jobs to foreigners and you have the perfect crossover Indo-British masala filmscript. Indians are highly emotional voters. Consider the overwhelming sympathy votes the Congress got in 1984 after Indira Gandhi’s assassination, and again in 1991 after her son Rajiv Gandhi was killed. Compare this with the way Winston Churchill was thrown out of office in the first post-war election in Britain. Well, guess again. Britain has changed since we last knew them in 1947. May be it’s the curry — now Britain’s favourite national food — that is responsible for firing up their emotions. But in last week’s referendum they voted like Indians: all heart and no head!

But it’s not just Britain where emotions rule strong. The amazing success of Donald Trump in securing a running slot for the US presidential elections this year is yet another illustration that the losers from globalisation far outnumber the winners. Marx’s prophesy about an implacable global class war between haves and have-nots seems to be eerily coming true a full two and one-half decades after his thoughts were effectively shelved in 1990. Even more oddly, it is via the deepening of democratic principles that we are rediscovering this running sore. Authoritarian regimes like China and Russia are relatively immune from such disruptions.

Direct democracy is in disrepute after “Brexit”. Some of this is because of our bias for stability and against disruption. But we cannot escape the fact that the long route to accountability via political representation and centralisation of decision-making power in the nation state is an imperfect transmitter of what people want, specially those belonging to marginalised communities. The answer is not less democracy but more deeper decentralisation to help bridge this chasm between voters’ needs and state action. This is particularly true for nations like India.

And what of macroeconomic policy? Has the Indian government done well by bidding adieu to the staunchest advocate of “dosanomics” in India? India needs to become more competitive. It cannot achieve this by remaining flabby with poorly-used capital and poorly-trained human resources. Capital allocation must strictly follow a measurable revenue stream. Public capital must be sparingly used to bolster the revenue stream for projects that generate public goods. The hybrid annuity model, being used in the roads sector, does precisely this and the initial feedback is positive. Getting infrastructure projects moving is the key for expanding jobs. Recent innovations in direct participation of small investors in oversight, over the use of additional contributions to complete stalled real estate projects, are a heartening trend in P4 — people, public, private, partnership.

The long-overdue reform is in using public sector human resources better by restructuring government processes for results. Two basic principles which have long been ignored are of equal opportunity in job progression across cadres and of equal pay for equal work. These are major de-motivators. Restoring balance in the pay progression of the armed forces has been a huge achievement. This must be followed through across other cadres. “Dosanomics” does not preclude any of the above. Prosperous city dwellers in London, savvy young folk in Oxbridge and well-off pensioners in their second homes in France or Italy got pulled up short in last week’s British referendum by the working moms from Portsmouth. A similar public cleavage in India between haves in smart cities and have-nots in villages would be disastrous. “Dosanomics” can show the way out.

( Source : Columnist )
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