The Economics of Corruption !!

Let us try to understand the dynamics of the market of Corruption. Why I chose economics over psychology or sociology or the politics because I think Like all other markets, Corruption involves transaction between two person, two parties, two agencies, the Buyer and the Seller! Let us try to examine the situation from the perspective of both the sides, so as to understand the Economics of corruption.

First of all, we must appreciate that Corruption is not confined to government officers and politicians only. We are not concerned about the scale of corruption, but corruption per say is not restricted to any segment or section of society.With this unbiased view, let us try to define the Buyers & Sellers for the sake of clarity.

The Buyers - we the people who seek goods and services from government and private individuals, agencies, corporations.

The Sellers - AGAIN, we the people who sell goods and services while working in private and government agencies, corporations, departments etc.

The Buyers Expectations

Pretty simple, to get things done (obtain goods or use services) as early as possible at the lowest possible price.

Let us break this seemingly simple sentence down into 3 parts and elaborate upon each part -

B.1) To get things done (obtain goods or use services)-

A. Things which can be easily transacted without breaking existing laws of the land. E.g. A 'normal' Postage stamp, PAN card, Bus ticket

B. Things which cant be transacted without breaking existing laws. E.g Narcotic drugs

C. Things which are still not covered/adequately under any existing laws/rules. E.g famous 2G, Land, Mines etc.

The bottom line is everybody wants to get things done. Some have time and patience hence they do it themselves, some dont, so they pay Agents. Few genuinely don't know the Things they want falls under which category (A,B,C), while few others intentionally play around with the ambiguity. So,it is important to have clear cut laws so as to avoid any interpretation related confusions, remove the 'Things' form category C asap.

By Simplifying The Procedures, the buyers/people will be motivated to remain in category A. By drastically Improving the Supply of fundamental 'Things' such as Water, Health-care, Education, Sanitation, micro- Loans/financing, Corruption can be reduced drastically. The problem is Government make the people believe that the cost associated with improving the Supply is very high, without telling them about the cumulative Losses and opportunity cost.

E.g the cost of Mumbai rains - cost of repairing/ renewing the damaged roads-sewerage vis-a-vis the cost of manhours/days lost, lives lost, damage to public and private properties etc.

B.2) As early as possible-

A. Time is a constraint for Buyer and he will loose, if things are not expedited ( and happen within 'stipulated time frame'). So, he tends to pay the bribe for expedition. In some cases, this Bribe can be Legalized as 'Expedition Fee', such as 'Tatkal' railway tickets, Speed Post, Tatkal Passport etc.

B. Time is a constraint for Buyer but he will loose only if things don't happen within 'stipulated time frame'. E.g - Pension, Gas/Electricity connection, Availability of subsidized urea/seeds, Ration cards, Hearing in the courts. Most of these are essential services and the Seller/Service providers know this fact and intentionally/unintentionally try to delay things. So care must be taken to identify and segregate the intentional and unintentional delays.

C. Time is not a constraint for Buyer. E.g- small IT refunds, voter ID card

So, it is important to define the 'Stipulated time', clearly. Private sector is used to providing goods and services in a time bound manner, so its high time that public sector learns this trait too.

Usually the Time Constraint can be reduced by using Internet Technology ( thus avoiding any chances of discretionary powers to decide who came first in the que). However poor internet penetration is still an issue, which can be and is being resolved though unknowingly by the private sector in an unplanned way.

B.3) At the lowest possible price -

A. By paying the 'stipulated price',the buyer is benefiting. E.g Train ticket.

B. The Buyer cant pay the 'stipulated price', i.e he will run into losses, if he does. E.g Poor migrated taxi driver, mixing Kerosene with Petrol, Hawker selling goods on road side

C. The Buyer can pay the 'stipulated price', but he wants to maximize his profits. E.g. Traffic rule violation fine, late fee etc.

So, the Buyer should have incentive to remain in category A above, however there will always be people in category C. This can be tackled in two drastically different manners, one by reducing the stipulated price, so that the incentives for paying bribe reduces such as low cost postal stamps, bus or general class train tickets. AND by increasing the stipulated price, so that the instances of violation, deviations reduces in individual's self interest, e.g high fine for traffic violation, high penalties for small instances of crime.

Cases in category C needs to be looked into more holistic manner with a reasonable Socialistic approach. Such as reducing the migration to cities by creating better life and employment opportunities in towns and villages, thus reducing the no. of unemployed, frustrated, misguided individuals in towns and cities and thus reducing crimes and associated corruption. By rehabilitating ALL street hawkers, road side sellers to a permanent market place, many direct and indirect crimes and associated corruption will reduce drastically. Easier said then done, but unfortunately there are no short cuts to this.

The Sellers Offerings

S.1.) The Exclusivity (in Public Sector) - the Seller knows that he has exclusive rights to sell some/all goods and services in that particular area. E.g Ration shop, Water Supply department etc.

The UID project will reduce exclusivity and hence will force Seller to behave professionally, thus reducing

corruption significantly. Providing more and more services online will also reduce the human intervention

and the human discretion, thus reducing opportunities to indulge in corrupt practices.

S.2) Competitive Scenario - if the Seller knows that the Buyer has a choice, he will try to maximize his Sale Price, which convinces Buyer to Buy the Goods and Services from him and not from his competitors. E.g Private Banks, Road and Airport operators have improved the quality of the infrastructure and quality of services offered.

Scenarios applicable in both S.1 and S.2 situation-

A) The Seller can provide goods and services easily, meeting ALL the expectations of Buyers.

B) The Seller is undergoing constraints (financial, time, resource) and hence wont be able meet expectations of ALL the Buyers. Hence will use his discretionary powers on which Buyers to Serve.

Under such situation, there's no option but to improve the Supply, either temporarily or permanently, else will lead to massive black marketing, hoarding. Such a situation arises due to poor anticipation (intentional or unintentional) of demand.

C) The Seller ( organization and/or individuals) feel that they don't get (salary, incentives, appreciation) what they deserve as compared to comparable others ( friends, colleagues, relatives) in private sector. So hence to meet expectations of their families, they compensate for by indulging in corrupt practices.

This is one of the un-addressed issues. While MPs have increased their salaries significantly by passing the laws, but the wages/salaries of those working at very basic level/entry to middle level in Police, Municipal corporation, Police, Water, Electricity dept has not changed much in past decade. Attracting and retaining talented people and keeping them motivated in Public Sector, is a much neglected aspect and a lot needs to be done about this.

In addition to remuneration, Recognition and Appreciation for good work is also critical. Somehow I don't like the idea of categorizing bureaucrats and elected representatives as Public Servants and thus expecting each and every one of them solely as social workers with no personal plans, vested interests etc. 100 years ago, this terminology was acceptable, but now Millions of people are working in public sector to earn their livelihood, out of personal interests, as a full time job and hence they are allowed to serve the interest of their families in the best possible manner like any Private Sector Servant !!

D) The Seller is not Accountable for Results, Performance (organization or individuals), growth or is not held accountable (by Buyer or by higher management), hence he/she is not keen on working too hard OR even working at all.

Lokpal Bills if drafted carefully, will address this issue of accountability and transparency.

In our day to day life, we will encounter situations which will arise due to a combination of The Buyers Expectations and the Sellers Offerings HENCE it's impractical/illogical to assume that one law, one bill, one person, one week, can change EVERYTHING BUT it's also impractical/illogical to assume that one law, one bill, one person, one week cant change ANYTHING !

Recession- Is the World Falling Apart - Part 2 !!

An Unexpected Part 2 !! I hope it does not turns into a trilogy !!

Back in December 2008, I wondered and mused whatever is happening to global economy, but the political and financial leaders are not taking the necessary, bold, corrective steps in time. Unfortunately the world leaders kept on salvaging the old stalwarts of Wall Streets, left, right and centre, perhaps that was the only option left. Unfortunately not many people are punished for committing financial crimes of by over leveraging in a hope to make quick buck and multiply the effect of that quick buck several times.

Low interest rates in developed world for decades and the compulsion of printing T Notes and Bonds and Currency, especially in the United States caused the Public and Private debt to grow into a monster, beyond control of almost anybody!

A temporary blip happened in the market sentiment in later half of 2010 and once again gold, crude, stock prices started going up, baring Real Estate! In ability of EU to create jobs, high spending habits of the people and the government led to massive accumulation of enormous public and private debt, utlimately causing the economies of whole countries such as Greece, Spain and Portugal to collapse. Now the fears are that of collapse of Euro, because the comparatively better off economies of Germany and France cant bear the burden of Italy, Spain, Portugal for a very long duration.

If Euro did collapse in coming months, years it will once again ensure the Numero Uno position of USD ( it is even now, but at least Euro had some chance) and another failed attempt (earlier being Japanese Yen and Chinese Yuan). What an irony once again ! Couple of years ago OPEC was contemplating of switching from USD to Euro and now we are wondering whether Euro will be dead alive in 2012 !!

An amazing war, conspiracy, symbiotic and parasitic relation is developing between the current and future no.1 country (on the basis of GDP). In order to compensate for reducing wages and unemployment, US still wants cheap Chinese imports of day to day items and perhaps luxury items as well ( habit! dont change overnight), despite what so ever anti-dumping laws, hue and cry in the public ! China's love affair for Exports ensures that it keeps accumulating USD from USA and from several other regions from all over the world. And with surplus USD in their kitty and a possible fall of Euro, they are left with nothing but investing in US bonds every now and then. So by printing more Currency on one hand US is receiving wrath of OPEC and on another of China, but the irony is both (all) of them cant do anything about it!

Sudden demise of Euro can increase the demand of USD and can strengthen the $ thus reassuring China and OPEC! So while fall of Euro will be really unfortunate, it can bring windfall profits to somebody else in seemingly unrelated relation!

So being poor and underdeveloped for decades finally started paying India in unexpected manner! We are resilient to global shocks and crisis, because we have far too many internal problems to solve. Fortunately, we have lots of gold and silver reserves hidden deep inside but in safe custody of our Lazy Gods for centuries!

So to summarize, I would like to repeat and age old adage especially in rural India -' Sab kuch Bhagwan bharose hai' ( Everything depends on the mercy of gods!), finally worked really well for us, in a way which even our Bhagwan would have never imagined thousands of years ago :) !!

Youth. At any cost !

A burning desire to succeed,

Sometimes at any cost!

Against Limited supply,

Of resources and inspiration, and,

Love of family and few friends.

Learnt to learn, grow,

Shine and outshine,

Achieved seemingly impossible,

Earned and remained happy,

Sometimes at any cost!

We are open, liberal,

Perhaps hypercritical.

We do pay our taxes,

Don't litter on much on streets,

Drive our new bikes, and

friend's car occasionally.

In a hurry to reach our destination,

Sometimes at any cost !

Whenever we faltered,

We stood up, sought advice,

Fought, made our own way.

Call centres, IT, Culinary Arts or Fashion,

Yes, no great innovation,

But some of us managed to thrive,

Sometimes at any cost !

We are thankful, indebted for the privilege,

Of being born in free India.

Yes, we know many issues,

Still unresolved.

Yes, be assured will be solved,

Perhaps slowly, but,

At any cost!

-----

Nitin

---------

Frankly, I started writing a prose and soon decided to convert it in a poem instead. Writing a poem after a long time, after having written some really long articles in the recent past :)

A Happy Independence Day to all, hope this year will be an year of action, beyond watching old patriotic movies and listening to old songs !

Tourism - An Untapped Opportunity !

Snow covered mountains, rivers, rice and paddy fields, rain forests, desert, beaches, islands, temples, churches, mosques, forts, palaces, museums, ponds, lakes, valleys, plateaus, ancient cities, towns,modern buildings,music, songs, dance, movies, theater,magicians,languages, dialects, religions and everything in abundance, everywhere, any day, every year and for 1000s of years, Incredible India !!

Lets look at some numbers here -



So Why Tourism, Why not IT or BPO or perhaps high end Pharma/LPO ?

Well the question is not Why not IT/BPO...no denying the fact that this industry has played a huge role in transforming the landscape in past 15-20 years, created several jobs etc BUT I believe that the size of Tourism industry which is directly proportional to cultural or geographic diversity has been immensely under performing .

So though we lack on macro economic parameters such as Per Capita GDP or prosperity indicator such as Cars/1000 folks, but definitely there's a huge scope for improvement on increasing the Tourist/Population ratio drastically. I understand that its much easier to run smaller countries like Macau, Tunisia or Malaysia purely based on tourism but still given the diversity of the India, I think we have a huge room for improvement, even if we are able to reach the league of Mexico or South Africa in next 10 years and perhaps Tunisia or Bulgaria in next 20 years, things can/will change drastically.

So What is Needed ?

Franky not much !! We already have the essential ingredients to make India as the most popular tourist destination in the world. All we need is little planning and keep doing what we are planning to do in any case, i.e improve infrastructure, improve public private partnerships and give incentives to the industry to thrive and grow. Based on my gut feeling and some thumb rules I strongly feel that with a little more dedicated efforts considering the tourism industry in mind, the opportunity and the potential to create a significant impact is huge.

The planning - the first thing perhaps would be to break down the Incredible India campaign into pieces, into states, regions etc, let it be sum of parts because India has much more to offer which a foreigner can comprehend in a 30 sec ad !!

The infrastructure - we definitely dont have roads, transportation and elaborate websites. I am not much concerned about hotels and restaurants and recreational activities because I have experienced, witnessed and lived in my small ways the unique entrepreneurial spirit of Indians which will take care of all these aspects beyond what any planning can achieve. But definitely the infrastructure needs a big boost. But the good thing is we need to improve the infrastructure in any case, so no need to tag this expenditure solely under Tourism industry.

The long term potential - the best and perhaps most critical need of the hour - rapid urbanization which is damaging the ecosystem in the villages, which is increasing the pressure on cities indirectly increasing the crime rates in cities, creating unnecessary pressure on infrastructure of cities AND the need to remain connected with what is ours, what is truly Bhartiya, our plural identity, unique to India.

So the employment and entrepreneurial opportunities in this field will have massive trickle down effects on improving the living conditions in rural India, poverty, education and employment. It will be a huge opportunity for ancillary industries such as banking and insurance besides media, entertainment, travel, hospitality and transportation which will be more direct beneficiaries.

Data Sources:

Population - Google

Tourism - Wikipedia Passenger Car - World Bank

Passenger Car - Trading Economics

Second hand revolution

After spending a year working in Qatar, I returned to India in May this year (No...no dont take me for the stereotyped NRI holding bottles of mineral water in hand and cursing government as the Auto Rikshaw drove passed the crowded lanes and maneuvering past the stray animals and potholes !!) and I found a sea of change in almost everything. Though I get a daily dose of Indian soap operas and entertaining news channels back in Qatar, but still I couldn't envisage the volume of changes which I was seeing for myself.

Skeptics declared they are done, its saturated. And then it comes back and hit the roads again. This time its slightly different perhaps little less creative but still effective and serving the bottom, middle and even the top of the pyramid to varying extent. A glance over Hindi and English newspaper the first day and I couldn't stop wondering about how can they afford this..within 5 minutes of surfing through channels...I was taken by surprise and really started wondering how can they really afford this...who are they and from where do they came and started conquering THE 'customers'. What I am talking about ? I hope thats not a question in your mind ! Isn't pretty clear, out n' loud !!

Loaded with Swarovski crystal, chic looks and (hold your breath, if your head is still reeling in an in vain attempt to guess what it is !!) 2 MP camera, weighs less than 100 gms and price Rs.5000/- (approximately $110) !! Its the new mobile from Micromax and let me tell you that I am no mobile expert and this post is not about the review of Q 55, bling from Micromax, which by the way 'Twinkles'

The Indian consumer over past 6 months or lets say 1 year has been pampered by OEM's which otherwise used to sell the hardware to the big guys. Micromax, Spice mobile, Lava, Videocon, Onida and so many more companies launching new handsets almost every week. You think your Black/Blue Berry with QWERTY keypad is cool..beat this
"Presenting Lava B5 handset with world's first ABCD keypad" funny,bizarre,innovative..Surprisingly nobody thought about it before (including me- can you believe it :)) But ya I think the guy is right...finally we can't use more than 2 fingers (anybody already using the 3rd finger yet must meet me ASAP) on the mobile phone keypad so...is the logic behind having QWERTY keypad in mobile handsets relevant? I would recommend carrying out some trials on mouse or cats perhaps and see how do they react to ABCD keypad !!

Surprisingly folks at Gartner agree with me, I swear I read this article only after typing the last paragraph !! Gosh...I should have written this blog the day I came back from India, which for the record was June the 6th 2010.