Sucheta Dalal :Great rip-off in name of development
Sucheta Dalal

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Great rip-off in name of development  

Apr 10, 2006

Why do we Indians find it so difficult to believe that foreigners are waiting to pour billions of dollars into India and are unable to digest the claim that a Sensex of 11,900 is based purely on fundamentals? The answer is in the daily headlines.


The latest in a long line of destructive government policies is the one on reservations for scheduled and backward classes at professional institutions such as the IITs (Indian Institute of Technology) and IIMs (Indian Institute of Management).


Ever since these institutions gained global recognition and respect, our politicians have been focussed on how to meddle with their administration. Whether it is Murli Manohar Joshi of the BJP or Arjun Singh of the Congress, they have found ways to needle these institutions, interfere with management and attempt to bring about a dilution in their high standards, instead of encourage them to go global.


A 20-year-old student has the good sense to suggest that free coaching and tuitions that helps students to succeed through the open merit list is the best help that politicians can backward class students. Abhayanand, Bihar’s Additional Director-General of Police has done this successfully in Bihar, by setting up Super-30, a free, spartan, gurukul style tuition group that has successfully trained dozens of poor and backward students to crack the IIT entrance examination. He runs Super-30 with Patna University topper Anand Kumar. Isn’t this a better model to replicate?


Consider another angle. Suicides by several IIT students had led to considerable public debate in Mumbai during the last couple of years. Psychologists opined that the pressure of competing with a class full of equally brilliant students and staying at the top of the class was often too much of a strain on sensitive youngsters. If this is true, then reservations will have one of two consequences in the long term—first, students in the reserved category will find it difficult to cope and end up sidelined and mentally fatigued; or there will be new pressure to dilute education standards to allow the non-merit category to manage.


But before that happens, a Mandal-type agitation is likely to be the immediate consequence. The on-going strike by State Bank of India (SBI) employees is another example of bad policy. It would be so easy to lump all trade union agitations together and criticise SBI employees. But remember, the agitating employees are protesting against the government and not their own management.


At the root of the problem is the fact that public sector banks have to compete with the private sector without any autonomy or power to decide pensions, salaries, promotions and performance-based increments. If performance incentives were allowed when SBI went public, along with stock options for employees, it would have blunted the staff unanimity over the pension issue that has led to a prolonged strike.


Unfortunately, the damage to SBI will not end with the strike. Under A.K. Purwar’s leadership, the mammoth State Bank of India had computerised over 13,700 branches, set up over 5,000 ATMs and created the largest core banking facility. It has also begun to foray into rural markets, financing of Small and Medium Enterprises and was fighting to bring back customers that it lost to private banks. A high profile advertising campaign was also attracting younger account holders.


All of that has suffered a big blow. Private sector clients who suffered during the strike are unlikely to return in a hurry and state governments who are being forced to use other banks’ services for meeting pension and salary obligations may also want to hedge their bets.


The biggest blow will be to top management, which has struggled thanklessly to increase the bank’s profitability and image. How can the government expect to motivate honest, poorly paid, senior management in nationalised banks without the autonomy to take key decisions? Gradual privatisation is the only long-term solution.


A third example of hair-brained protectionism pertains to India’s post offices. One the one hand, the government plans to allow post offices to operate like corporate entities that will sell and market a host of products and services through its vast nation-wide network.


This will allow post offices to raise revenue by displaying advertisements, house ATM machines of different banks, sell insurance and financial services and also collect important applications and documents. The government has also allowed post office insurance schemes to invest in the capital market. While one may question the timing of this decision, it certainly spells more freedom for the postal department.


Aren’t these reforms adequate to transform post offices into profitable entities? After all, they have the largest possible national network. But no, the government wants to skew the playing field in their favour through a ridiculous proposal that will bar private courier companies from carrying articles below 500 grams.


At a time when the economy is growth at 8% and aspiring for 10%, there is more business opportunity than anybody can handle. The government should be acting as a facilitator to ensure that trade and business gets fast, efficient and inexpensive services instead of retarding business and increasing costs through policy induced shortages.


Another recent decision in a similar genre is the proposal to levy a Rs 500 cess on air travel to develop small airports. Basically, this means that most of the tax will be collected at the six metropolitan cities and air-travellers will have to fork out money without expecting any improvement in their own airport facilities or service.


From the 2% education cess, to the tax on petrol that funds the golden quadrilateral to various flyovers and bridges in different states; government policy is aimed at ripping off a growing number of middle class people, whose incomes are rising at 15-20% annually due to sheer hard work and ambition. Unfortunately, the policies that affect them are decided by politicians and bureaucrats who don’t even relate to the aspirations of this class of Indians.

-- Sucheta Dalal