Writing columns is a funny business. Sometimes it just pours out smoothly, with no effort, and it’s as if you never did a thing. Other times, it’s a real pain as you struggle to come up with ideas that may be meaningful and then you struggle to communicate them as well as you can.
This column was squarely in the second camp till I ran into Nandan Nilekani a few nights ago at an innovation awards function where he was, unsurprisingly, the star. We chatted for a bit at the cocktails and our discussion crystallised one of the ideas I had been playing with — thank you, Nandan.
The idea – admittedly, not an original one – was that the problem with 24x7 news is that the vast bulk of it is noise. And while we all understand this from an intellectual standpoint, its insistent presence usually leads most of us to believe that the world is ending, India is drowning in a sewer of corruption and inefficiency, and, as a result, the rupee will be going to hell in a hand basket.
There is a crying need, as always, for a bit of perspective.
So, let’s step back about five years, to 2007. Global markets were rocking like the music would never stop. The word “risk” had disappeared from the market’s lexicon — the one-year average of the Volatility Index (accepted as the best measure of risk aversion) was at an all-time low. Money was pouring into India – as, indeed, into as wide an array of risk assets as could be constructed – and the stock market was riding high. The rupee — well, everyone believed it would hit 35 in no time.
The India story was the toast of the world, sustainable double-digit growth was a given, the bar at the Oberoi was packed every night, hotel rooms cost more than the earth — everybody had their dancing shoes on all the time.
Of course, just as the toast was being buttered, the subprime crisis erupted in the US, unleashing a dust storm into global financial markets the like of which few had ever seen. Everything was turned upside down as virulent debris spread to every corner of the globe — from New Zealand to Iceland to the euro zone to Brazil and, of course, to India.
The dust began to choke the engine of growth, and the grotesque (if necessary) monetary and fiscal response roused the sleeping beast of inflation. The Reserve Bank of India – a veritable Durga – fought in several arenas at once to keep some semblance of stability. And the worst excesses of the good times began to slip out of the government’s closet.
Many years ago, John Kenneth Galbraith very elegantly explained that in all systems there is some amount of chori going on, which he called the “bezzle”. When times are good, nobody pays much attention to the bezzle since everyone is making money, till, unattended, the bezzle becomes overwhelming and, tumbling into the open, crashes the system. Conversely, system crashes uncover a lot of past corruption — those swimming naked when the tide goes out.
And here we are today with a lot of nervous nudity, and everyone wringing their hands, gnashing their teeth, and extremely upset about corruption, policy paralysis, retrospective application of tax laws, corruption, attempts to steal from people who avoid taxes, corruption, high interest rates, slowing growth, corruption, and — you get the picture.
If we were to step back from the noise and shake our heads free of the dust, the fact remains that India is still one of the best games in town. While there’s no gainsaying that we have huge amounts of work to do in improving governance, there’s also no arguing against 1.2 billion people, the majority of whom believe in their future.
And this becomes apparent when you look at some of the initiatives that are in full flow — here comes Nandan. The most powerful of them is the Unique ID programme, which has enrolled 200 million people, with 155 million numbers already assigned. This is just the starting point, with the next phase looking to enroll another 400 million. More important, the platform is designed internet-like to enable a huge range of vendors (currently government, but in the future who knows) to create applications to deliver services — public distribution system, subsidies to farmers, education vouchers, drivers’ licences, whatever.
In 18 months, there will be 50 million people using some of these apps; in five years, perhaps 300 million — about the population of the United States. In addition to the huge boost to empowerment, this will do wonders for the budget deficit, always the single biggest constraint on India’s growth. The double-digit dream will still become a reality.
As for the rupee … 38 to the dollar in five years, anyone?
jamal@mecklai.com
